The Terra Market Rally (MOON) this week risks running out as price retests a key trend line for a potential pullback.
A descending channel puts LUNA at risk of experiencing a downturn
LUNA has been in a downtrend within a descending channel – made up of two parallel descending trendlines – since December 2021. In doing so, the Terra network token typically tests the lower trendline as support for a bounce to the upper trend line, as shown in the chart below.
Similarly, a pullback from the upper trend line sends the price to the lower trend line. For the time being, LUNA looks poised to repeat the corrective move, benchmarked against its daily Relative Strength Index which is now approaching its overbought reading of 70, a sell indicator.
If the pullback occurs, the price would risk falling to its interim downside target near $52, coinciding with the 0.5 Fib line of the Fibonacci retracement chart drawn from the $4 low to $100 high.
If a long correction occurs, LUNA could retest $40, a 0.618 Fibonacci line approaching the lower trendline of the descending channel.
Luna has been the best performing token so far this week
The short-term bearish outlook comes after the price of Terra has surged 45% to around $68 this week, its highest level since Jan 25. Interestingly, the LUNA/USD pair rose despite a gloomy outlook in the rest of the crypto market, led by the Russian military invasion of Ukraine, which dampened investors’ risk sentiments.
The next best performing token this week among the top cryptocurrencies has been Cardano (ADA). Interestingly, week-to-date ADA returns sit close to 6% below zero, meaning that LUNA has outperformed its closest rivals, including Bitcoin (BTC) and ether (ETH), by a wide percentage margin in that period.
LUNA’s strong performance appeared to be due in part to news surrounding the $1 billion raised to establish a Bitcoin reserve for Terra’s UST stablecoin. Additionally, Anchor Protocol (ANC), which recently received $450 million in UST from the Luna Foundation Guard (LFG), is up nearly 70% under Terra’s shadow.
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