Chainlink eyeballed an additional 15% ascent after rebounding from the lower trendline of its up-channel. However, a few conditions had to be met for LINK to fully realize its near-term potential. At the time of writing LINK traded at $16.5, up by 3.2% over the last 24 hours.
Chainlink 4-hour Time Frame
Chainlink had to overcome a few areas of sell pressure before forming a new higher high at the upper trendline. The resistance trifecta between the 20-SMA (red), $16.7-resistance, and 38.2% Fibonacci could be problematic for bulls, especially with the volume oscillator dipping as LINK challenged its near-term MA’s.
Hence, a continuation on the chart was not a guarantee just yet. However, a significant chunk of selling pressure would be dispelled above $17.2. The following breakout would see LINK target a fresh high around $19. If the move is preceded by strong volumes, an upward breakout could be possible.
Meanwhile, a rejection at the 20-SMA (red) would all for another retest of the lower trendline around $15.5. A breakdown would drag LINK towards its immediate defenses at $14.3 or $13.4.
Trading Strategy
Chainlink had some distance to cover before an upwards breakout and the setups pertained more to a near-term outlook. Long positions can be held once LINK hits $17.2 and take-profits can be set at $19. Stop-losses should be kept at $16. The hypothetical trade carried a risk/reward ratio of 1.14.
A breakdown from the pattern must be followed by short positions below $15.3. Take-profits can be set between $14.3 or $13.4, depending on volumes.
Conclusion
Placing long bets on LINK’s 4-hour timeframe is precarious considering the price traded below a staunch resistance zone. Hence, safer positions can be taken once LINK clears these hurdles and touches $17.2. A northbound breakout would even push LINK towards $21 in a highly optimistic outcome. On the flip side, a breakdown can be dealt with by setting up short trades at the above-mentioned levels.