Avalanche (AVAX) has been on a tear this year, with a year-to-date gain of about 2,000%! Now the question is, will a huge drop occur, as is usual after a huge rally like this? It recently breached a previous all-time high level of $60.30, just a few weeks ago, and even tried to rally to $80.00. But now, it is weakening and correcting back to the $60 level. Are we nearing the end of AVAX’s explosive bull run?

3 Possible Scenarios Down to 2

In an article written on September 23, I mentioned three possible scenarios for AVAX, and now it seems that, due to the recent price movements, the probabilities have been narrowed down to just two scenarios. These were the situations I mentioned in September: 

Situation 1: Consolidation. A basing pattern, like a pennant or volatility contraction pattern above this resistance level, in the next weeks or months, would be ideal for AVAX. 

Situation 2: Momentum. A more bullish perspective would be if AVAX were to take on a momentum phase and show explosive price action, reaching 80 or even 100. 

Situation 3: Breakdown. At this point, AVAX should not fall back below the 45.00 level, as this would mean a breakdown of the upward channel and possibly selling down back towards the 200-day moving average. 

At the time of writing, the price action suggests Situations 1 (Consolidation) and 3 (Breakdown) are the more likely scenarios for AVAX in the short term. Both the  technical indicators of momentum, the MACD and the ADX, have been showing signs of weakening and lack of bullish strength recently, confirming that Situation 2 (Momentum) is highly unlikely for the time being. 

*AVAX’s upward trend is intact as the trading volume increases exponentially

Key Technical Observations

Positives:

• • • Golden Cross present, suggesting bullish sentiment
    • Explosive trading volume since the start of the rally in late August
    • Short-term upward channel still intact
    • Trading volume slow-down during the recent correction

Negatives: 

• • • MACD and ADX are both weakening
    • Price dipped below the support level yesterday before bouncing back above it

AVAX Nearing Major Support Levels

Observe closely how the price action behaves as it retests the previous resistance, now turned major support levels of $58 to $60. A price breakdown below this area, with high volume, could be very alarming, and may be a catalyst for a breakdown. 

On the other hand, if the price correction weakens and consolidates above this major support level, a continuation rally will most probably occur. At this point, there are no obvious buy or sell signals, but watch closely, as a landslide could happen at any time. 

What is Avalanche? 

Avalanche (AVAX) is currently the 13th-largest cryptocurrency, with a market capitalization of $13.8 Billion. It is a smart contracts platform that offers cheap, fast and easy transactions in the blockchain. It boasts of a transaction output of 6,500 transactions per second. AVAX is the utility token of Avalanche, which can be used to pay fees and conduct staking on the platform.