ALGO’s Downtrend Maxed at 34%, Key $0.40 Demand Zone

Will the trend reverse itself at the support amid weak demand?

Algorand’s [ALGO] price pullback hit 34% after dropping from $0.61 to $0.40. The decline followed a slight strengthening of Bitcoin’s [BTC] dominance, pausing most of the altcoin market’s momentum temporarily.

ALGO stabilized above $0.40 during the early December liquidation cascade, which massively affected the altcoin sector. Will this level reverse the ongoing downtrend?

ALGO – Will $0.40 Hold?

The $0.40 area also doubled as the price imbalance set in late November, serving as a key demand zone. However, the last strong bounce from the zone was rejected at the channel’s range high.

At press time, the price action returned to the zone and could maintain this level, given the low demand indicated by the below-average RSI reading.

Additionally, while capital inflows improved, they remain below a key level required to reverse the downtrend. In fact, inflows in December stayed below zero, as shown by the CMF (Chaikin Money Flow).

In summary, a bounce at $0.40 might face another rejection at the upper channel ($0.43) if key technical indicators remain muted.

If selling pressure continues and ALGO breaches the $0.40 support, the next level of relief could be its March high of $0.33.

Will Shorting Yield Gains?

On the 4-hour chart, SuperTrend has not reset the sell signal flagged on December 9. This indicates that shorting ALGO is more viable than going long as its downtrend continues.

The flat demand from the spot market, reinforced by low CVD spot, supports the short sellers’ edge in the market.

Read Algorand [ALGO] Price Prediction 2024-2025

In conclusion, ALGO weakened over the past two weeks as sellers increased in the market. For bulls looking to re-enter, a strong bounce at $0.40 or $0.33 might signal a price trend reversal. However, this bounce should be supported by strong demand, flows, and a decisive move above $0.43.

Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion.