- ATOM had a massive bullish breakout from an inverse head and shoulders pattern towards $6.26.
- The digital asset is currently retesting the neckline of the pattern.
Cosmos had a massive price spike after breaking out of the inverse head and shoulders pattern formed on the 4-hour chart. The digital asset gained more than $700 million since the crash on March 12 and saw an increase in trading volume in the past two months.
ATOM needs to hold $5.3 to avoid further downside action
After the decisive breakout of the inverse head and shoulders pattern on October 10, ATOM managed to climb towards $6.26 within the next 48 hours, surging 16%. The RSI got extremely overextended, and the price eventually had a correction.
ATOM/USDT 4-hour chart
The current price of ATOM is $5.46, just above the neckline of the inverse head and shoulders at $5.3. This support level is the most crucial point on the 4-hour chart, although bulls can find additional support at the 100-SMA ($5.36). A bounce from this critical level can lead ATOM towards $6.5, the length of the line between the neckline to the head of the pattern.
It's important to note that, on the other hand, a bearish breakout below the neckline of the pattern would be notable. The MACD has turned bearish on October 13, and although it looked like it was recovering, it is gaining strength again in the past 24 hours.
Slipping below $5.3 has the potential to drive ATOM down to at least $5 where the 200-SMA is established; however, an extended sell-off might even drop the digital asset to $4.5, the bottom of the right shoulder of the inverse head and shoulders pattern.
ATOM/USDT 1-hour chart
On the hourly chart, ATOM's price already slipped below the 50-SMA, the 100-SMA, and finally the 200-SMA, turning all three into resistance levels. The short-term bounce we see will most likely be stopped by the resistance level at $5.5, where the 200-SMA and the 100-SMA coincide.
Key price levels for ATOM to keep in mind
The formation and breakout of the inverse head and shoulders pattern is a heavily bullish pattern. However, buyers need to protect the $5.3 support level to see a bounce towards $6.5, the length of the line between the neckline to the head of the pattern.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.