Chainlink (LINK) shows signs of a potential rebound after consolidating above the $18 mark. Following a significant correction from previous highs, LINK is now at a key decision point. The price has stabilized above crucial support levels, creating an opportunity for a potential bullish move.
Correction Phase Complete: A New Impulse Begins
After peaking at $30.80 in mid-December 2024, LINK entered a corrective phase. This correction unfolded in a WXY pattern, finding support just below the 0.618 Fibonacci retracement at $16. Now, the market appears ready for the next move. The 4-hour chart shows that LINK has completed a five-wave Elliott Wave structure, suggesting the end of the correction and the beginning of a new bullish cycle.
Descending Triangle: A Bullish Signal
A descending triangle formation has emerged on the chart. This pattern typically signals a bullish reversal. The price has tested the lower boundary of this triangle multiple times, but buyers have stepped in each time, preventing further downside. This behavior indicates strong support at the $18 level, which could act as a foundation for a rally.
RSI Divergence Suggests Momentum Shift
The Relative Strength Index (RSI) shows a bullish divergence, signaling a shift in momentum. While the price made lower lows, the RSI made higher lows. This divergence suggests that the bearish momentum is weakening, and a breakout could be on the horizon.
Resistance Levels to Watch
If LINK manages to break out of the descending triangle, it faces immediate resistance at $20.45, aligning with the 0.5 Fibonacci retracement level. A breakthrough at this level would open the door for a stronger resistance at $22.89, near the 0.382 Fibonacci retracement. A breakout above these levels could confirm the end of the correction and kickstart a new impulsive wave.
Bullish Targets and Fibonacci Projections
The 1-hour chart reveals that LINK is primed for an impulsive wave (iii) upwards, following a completed corrective wave (ii) at $17.47. If this wave extends as expected, LINK could target $23.51 at the 1.0 Fibonacci extension and $25.15 at the 1.272 Fibonacci level. Further bullish momentum could push the price to $27.24 (1.618 Fibonacci extension) and potentially beyond $29.55 in wave (v).
Risks to the Bullish Scenario
The bullish outlook hinges on LINK holding above $18. If the price fails to maintain support at this level, the market could retest the $14.53 level, which aligns with the 0.786 Fibonacci retracement. A move below this critical support could invalidate the bullish scenario and signal further downside potential.
Key Levels to Watch:
- Immediate Resistance: $20.45 (0.5 Fibonacci retracement)
- Key Support: $18.00 (0.618 Fibonacci retracement)
- Critical Support: $14.53 (0.786 Fibonacci retracement)
- Short-Term Target for Wave (v): $29.55 and beyond
- Invalidation Zone: Below $14.00
