Shiba Inu cannot catch a break and remains vulnerable to 40% correction

Saif Naqvi
Source: Pixabay

After recording its best-ever day on 13 May since the Robinhood listing, Shiba Inu’s bullish bias way quickly faded away on Monday morning. The price was dangerously close to breaking down from a bearish pennant and with downside risks still intact, a 40% correction cannot be ruled out this week.

As highlighted in an earlier article, Shiba Inu had to establish new supports between $0.0000 to avoid slipping down to its July 2021 levels. Now, the weekend spike was the first stepping stone needed to establish a new base but let’s take a look at whether SHIB was able to stand its ground.

Source: TradingView

On the 4-hour time frame, Shiba Inu created a few highs above $0.0000100 but was unable to withstand selling pressure as gains were limited to the 61.8% Fibonacci level (calculated through SHIB’s decline from $0.00001794-$0.00000874). As pressure weakened on Monday morning, SHIB moved back below the 50% and 38.2% Fib levels, and a candle had already punctured below the bearish pennant pattern. The development primed SHIB for weaker price action.

Source: IntoTheBlock

This was further supplemented by exchange data which showed that most investors were skeptical of buying Shiba Inu. Although a few buy orders were made in the past hour, sell-side pressure still dominated at press time.

What happens if SHIB breaks below $0.0000100?

Source: TradingView

Now, if Shiba Inu breaks below the bearish pattern and closes below $0.0000100, its market structure could shatter once again. The lack of immediate support could see SHIB extends losses to $0.00000600 – a level which SHIB hasn’t tested since July 2021.

On the plus side, the $0.00000600 level seemed to be a good buy opportunity for long-term investors. The area had triggered multiple rallies for SHIB last year, each ranging between 70%-80%.

However, until then, Shiba Inu traders must be prepared to take more hits on their investments. To hedge risks, a short setup can be initiated below $0.0000100 and take-profits can be set at $0.00000600. A stop-loss can be kept at $0.00001400. The trade setup carried a 1 risk/reward ratio.