Polygon bloodbath not over yet, MATIC bears plan another 20% drop

Polygon is testing a fundamental level to the downside that could open up more losses, even to the extent of 20%.
Over the past three days, Polygon already had to book 43% of devaluation because of headwinds in cryptocurrencies.
Buyers will need to wait before stepping in until price action stabilizes.

Polygon (MATIC) is in trouble, and yesterday's global rout in cryptocurrencies could not have come at a worse time. MATIC was already shedding some profit after the rally up on September 4. A failed attempt to jump toward $2 made buyers quickly take profit and opened the door for sellers to start fading into a short.

Price action in Polygon got squeezed against the green ascending trend line that acted as the backbone for the rally since July 20. The real break lower came after the rollout of Bitcoin as the reserve currency for El Salvador. Polygon shed almost 40% of its value in just one day, as cryptocurrencies rolled over across the board.

Polygon is a falling knife: do not dare catch it

More headaches ahead for investors of Polygon as today's price action got rejected around $1.40. That level falls in line with the orange long-term ascending trend line from March 22. With multiple retests on both upside and downsides, it has a proven track record.

MATIC/USD daily chart

The fact that buyers could not push price back above this orange ascending trend line spells more downside to come in MATIC price action. On the downside, the first level of interest appears at $1.20. Just above, around $1.25, the 55-day Simple Moving Average (SMA) comes in. Although that 55-day SMA looks attractive, it needs to prove that it has or holds some importance for MATIC.

For the patient investors, an excellent opportunity lies at $1, where Polygon has the S1 monthly support level falling in line with the 200-day SMA. These are two big forces. Especially the 200-day SMA, as that was the starting point for the rally on July 20 and might reenact its former glory.

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