Tezos’s price and its short-term future were looking bleak, especially after the cryptocurrency’s price dropped below its 200 DMA on the 6-hour chart. In fact, this development pushed the price down from $3.53 to $2.53 over the past week. If this wasn’t enough, more may be on its way for Tezos.
Tezos 6-hour chart
Source: XTZUSD on TradingView
Tezos’s 6-hour chart showed the formation of a bearish pennant, one that might push its price down from 12% to 25% and perhaps, even lower, if it comes to that. A bearish pennant is also a continuation pattern, one that is formed as a break from the sell-off. Once the consolidation ends, the price continues on its original path.
For now, the original path that Tezos was taking before the consolidation was south. Hence, when this pennant breaks, the price will head down. Based on the attached chart, there are three possible scenarios/targets for this breakout to end.
The first would mean a 12% drop to $2.2134 and the second would be an 18% drop to $2.059. The third scenario would mean a 25% drop to $1.89. This, however, will be a little far-fetched in light of the press time market health.
Hence, a short position with an entry at $2.556 and a stop-loss at $2.897 would yield a profit of 1.44R considering the 2nd target. The target can be eye-balled as the price could stop and reverse at the first target if the crypto ecosystem decides to rally. Further supporting this scenario was the bearish divergence between the price and the RSI since it clearly pointed to a downtrend.
Bitcoin’s correlation with Tezos and other altcoins continues to grow amid Bitcoin’s uncertain price, especially with the latter dipping below $10,000, but resurfacing quickly. Hence, the Tezos set-up could fall if Bitcoin rallies higher. However, if Bitcoin crashes, so will Tezos, and this will be in addition to the already bearish set-up for the coin.
Either way, a profit of 12-25% can be easily made with this set-up. Based on the general rules of pennants, the height of the entry will, in a way, dictate the drop. This way indicates that the price of Tezos might head to as low as $1.397.