XRP chart triggers sell warning after 54% price explosion in one week

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XRP price almost hit its three-month high after a strong continuation of the uptrend on August 14. Nonetheless, its wild weekly momentum has triggered overvaluation risks, increasing the possibilities of an impending price pullback.

In detail, the XRP / USD exchange rose 11.78% to $ 1.20 for the first time since May 22. 134% bullish retracement overall.

Since the start of the week, XRP / USD rates have risen by around 54%.

Overbought XRP

The latest bullish moves in the XRP market have prompted two classic indicators to forecast impending price corrections.

The first indicator is the relative strength indicator (RSI). It represents a magnitude of price changes to assess overbought or oversold conditions. In detail, the RSI hovers between zero and 100, with a reading above 70 indicating overbought and a reading below 30 indicating oversold conditions.

If the asset’s RSI remains above 70, this usually prompts traders to sell it at higher prices to ensure maximum profit available. Likewise, if the RSI drops below 30, it creates opportunities for traders to buy the asset at a seemingly lower rate.

XRP / USD’s daily RSI triggered warnings of excessive valuations after its readings broke through 70. As a result, the pair saw a modest sell off near its local high of $ 1.20, dipping to 1.14 $ at time of publication.

XRP / USD daily price chart with RSI indicator. Source: TradingView.com

The second indicator is Bollinger bands.

These are envelopes plotted at a standard deviation level above and below the simple moving average of the price. They tend to measure the volatility of an asset based on the distance between the upper and lower band. When the price goes out of the band, it tends to immediately move back inside the area of ​​the band.

XRP / USD Daily Price Chart with Bollinger Bands Indicator. Source: TradingView.com

XRP / USD’s latest volatile bullish move pushed rates out of upper band resistance, signaling overvaluation. As a result, its probability of breaking back below the upper band level appears high, which may later be accompanied by a prolonged movement towards the 20-day simple moving average (orange wave) near $ 0.80.

Additional earnings expected

Despite the risks of overvaluation, other traders believe XRP is about to continue its bull run. For example, independent market analyst DonAlt thought XRP could sprint to its all-time high simply because it broke through a so-called resistance zone, as shown in the chart below.

XRP / USD BitFinex daily chart. Source: TradingView.com, DonAlt

“Near above red ($ 1) this week and see no reason for XRP not to create new ATHs,” the analyst said, adding:

“But, at the same time, if he ATHS, the end of the race is near.”

Kevin Cage, another popular chart analyst, added a dose of fundamentals bullish outlook, noting that XRP at an all-time high would mean Ripple has struck a deal with the U.S. Securities and Exchange Commission (SEC).

The US securities regulator filed a complaint against Ripple in December 2020, alleging that the latter had engaged in this illegal offering of securities through the sale of XRP tokens in 2013 and thereafter. Ripple has denied the allegations.

Related: SEC Wants ‘Terabytes’ of Ripple’s Slack Communications

On August 16, Ripple will respond to the SEC’s request for the discovery of “terabytes” of Slack communications data. The documents, if filed, could shed more light on whether or not Ripple sold XRP to its investors as securities.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move comes with risk, you should do your own research before making a decision.