XRP has enjoyed a spectacular January, soaring nearly 50% and briefly touching $3.39 on January 18th, its highest point in nearly seven years. However, the explosive rally may be nearing an end, with technical indicators hinting at a potential downside correction of up to 25%.
A significant concern is the emergence of a bearish divergence between XRP's price and its daily Relative Strength Index (RSI). While XRP has been climbing to multi-year highs, the RSI has trended lower, forming a descending pattern. This divergence signals waning upward momentum behind XRP's rally, increasing the probability of a price reversal in the near future.
Furthermore, XRP's latest rally has pushed its RSI reading to 66.87, approaching the overbought threshold of 70. Although not yet overbought, the RSI's declining trend suggests diminishing buying pressure at current levels, which could exacerbate selling pressure towards the $2.28 downside target.
Is the XRP Bull Run Over?
As mentioned, the bearish divergence increases the likelihood of a pullback towards $2.28, coinciding with the upper trendline of its prevailing bull flag pattern. A bull flag pattern forms when the price consolidates within a downward-sloping parallel channel following a strong uptrend. Typically, it resolves when the price breaks above the upper trendline and rises by an amount equal to the height of the preceding uptrend.
XRP has already entered the breakout phase of its bull flag pattern. However, after a breakout, the price often retests the pattern's upper trendline to confirm it as new support. This retest validates the breakout and provides an entry point for new buyers. A successful bounce from the upper trendline strengthens the bullish case and paves the way for a move higher towards the original upside target.
In XRP's case, the bull flag's upside target is around $4.42, a 40% increase from current price levels. Moreover, XRP's long-term outlook remains positive, supported by the potential launch of spot XRP exchange-traded funds (ETFs) in the US.
January 2025, Cryptoniteuae