FTM appears to be making new record highs in the upcoming sessions after the price rebounded 125% from $ 1.23 on December 14, 2021 to $ 2.87 on January 4, 2022. This move triggered the classic bullish reversal setup.
An inverse head and shoulders (IH&S) pattern occurs when an asset makes 3 lows below neck resistance, with the mean (head) low lower than the left and right shoulders.
The FTM recently embarked on a similar path. Hence, the price has general resistance in the defined range of $ 2.55 to $ 2.74, including the length of the inverse head and shoulders pattern.
Daily FTM / USD Price Chart and Inverse Head and Shoulders | Source: TradingView
Can FTM go up another 50%?
In a perfect world, the usual IH&S pattern would result in a bullish breakout once price closes well above the neckline. Ideally, the up target is the maximum distance between the head and neck line measured from the breakout point.
On Monday, FTM almost completed the IH&S pattern by reaching the cutout. Hence, the token’s next move could be a bullish breakout above the $ 2.55-2.74 resistance area. Accordingly, the price will go up to $ 4.33 based on the setup shown in the graphic below.
Daily FTM / USD Price Chart and Breakout Setup IH&S | Source: TradingView
A sharp drop in the neck area, accompanied by an increase in volume, threatens to weaken the IH&S pattern. In this case, the closest ideal support line may be near $ 2.08. This level is determined based on FTM’s Volume Profile Visibility Range (VPVR), a metric that shows trading activity over a period of time at certain price levels.
FTM / USD daily rate chart and volume profile target | Source: TradingView
Is there a risk of overvaluation?
Downside risk in the Fantom market is also reflected in the Relative Strength Index (RSI), an indicator that measures recent changes in the price of an asset to measure overbought or oversold conditions.
In particular, the FTM Daily RSI entered the overbought territory on Jan 3rd when its value rose slightly above 70.
Conventionally, an RSI above 70 is generally considered a sell signal. However, a sell-off does not usually happen immediately after the RSI has jumped into the overbought zone.
Looking at multiple RSI corrections between August and September 2021, FTM price appears to be extending its bullish momentum even after the indicator crossed the 70 mark. Even the daily RSI hit nearly 89 that day, a record high of $ 1.99.
Daily FTM / USD Price Chart and RSI Corrections | Source: TradingView
This partially gives FTM the opportunity to pursue the IH&S model profit target of $ 4.33 despite the risk of overvaluation. The price then corrects to the 20-day exponential moving average (20-day EMA, green wave in the chart) by $ 2.09.
This move will bring the price close to the VPVR support at $ 2.08 as detailed above.
You can see the price of FTM here.
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Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.