Chainlink (LINK) has been making headlines lately following a notable price movement. After hitting a low not seen since early August, briefly dipping below $20, the token has shown signs of recovery. However, the initial drop triggered a significant wave of short-selling from traders who anticipated further declines. As the market stands, LINK is positioned precariously, where a sudden uptick in price may lead to a short squeeze, impacting those maintaining bearish positions.
Analyzing the 4-hour chart, it’s evident that LINK has begun to display strength. A bullish divergence has formed even as three consecutive red histogram bars suggested bearish pressure. Compounding this positive development, the Chaikin Money Flow (CMF) indicator has moved above zero, indicating that capital inflows are now outpacing outflows. With the CMF currently reading at 0.20—its highest level in weeks—there are signs that buyers might be regaining control of the market.
The price action is currently contained within a symmetrical triangle, suggesting that a significant price movement could occur soon, but the direction remains unclear. As LINK approaches this decisive phase, both tightening price action and increased on-chain activity indicate a potential breakout could be imminent. A successful breach above the triangle’s upper trendline could see LINK target a resistance level of $23.36.
Despite these bullish signs, the funding rate for Chainlink has turned negative, revealing a market heavily skewed towards short positions. This situation could paradoxically serve as an advantage for LINK. If the price begins to rise, those who are heavily shorting may be compelled to close their positions rapidly to avoid significant losses, potentially leading to a short squeeze that could send the price soaring.
On the daily chart, LINK continues to navigate a descending channel that has kept the price under pressure for several weeks. This downtrend coincides with the Money Flow Index (MFI) entering oversold territory, indicating substantial selling. Nonetheless, there’s a shift at play; the MFI has broken its downtrend and is inching toward the neutral 50.00 line. A decisive move beyond this level could signify increasing buying pressure and potentially reverse the current market trend.
In a highly optimistic scenario, if Chainlink can break through critical resistance levels, projections suggest its price could reach up to $38.30. On the other hand, should the market fail to maintain its support, a significant drop down to $17.42 could occur.
With these dynamics at play, investors are closely monitoring LINK’s performance, weighing the potential for both recovery and further decline as the market continues to fluctuate.
