Polygon Testing Multi-Month Support, Will it Hold?
Polygon's (MATIC) sharp decline has led the cryptocurrency to retest multi-month support at around the $0.50 level. While the support level can provide us with a bounce, there is a significant chance of a bearish breakdown due to the bearish flag formation that can lead to another sell-off.
Multi-Month Support
The $0.50 support zone has not been tested since July 2021.
This was a crucial level in 2021 that marked the rally's start towards the all-time high of $2.92.
Additionally, the decline from December's 2021 high is unfolding in 3 big waves, a corrective price formation. The ABC decline appears to be completed as we have almost reached the 100% Fibonacci extension of the A leg measured against the high of wave B.
If MATIC's price can stabilize around the $0.50 support level, any subsequent rally can face resistance at the $1.00 considerable psychological number.
Bearish Flag Formation
If MATIC fails to hold the $0.50 zone as support, the bearish flag pattern can be activated, and the cryptocurrency can fall further.
However, the current trend remains bearish as most of the Relative Strength Index (RSI) readings are below the 50 mid-level, signaling bearish pressures.
What is a Bearish Flag Formation?
A bearish flag formation is a common technical pattern that supports the continuation of a bearish trend, as it is merely a continuation pattern.
The bearish flag formation is a rectangle pattern that develops after a strong bearish move, known as the flag pole.
The bearish flag marks the consolidation phase before the second leg of the trend resumes. The pattern is considered reliable after it is confirmed by a breakout below the lower side of the flag.
What is MATIC?
Polygon is a network of sidechains, built as a scaling solution for Ethereum. It enables users to deploy and run decentralized applications (DApp) on a single layer, avoiding the restrictions of the Ethereum blockchain.
The Polygon team created a set of tools that enable developers to build their own sidechains without having to make their own network. Polygon aims to make the process of creating sidechains as easy as possible.
In summary,
Polygon remains stuck between a rock and a hard place as we have strong bullish signals and bearish signals at the same time. The $0.50 support zone is a crucial level that must hold to keep the bullish outlook. Otherwise, MATIC can continue its bearish trend towards the $0.30 support zone.
As the bull-bear battle intensifies, there is a significant chance we will end up in more consolidation, but time will tell how this battle will be resolved.
