The market structure of Chainlink was still bullish, but weakened demand threatened to drive prices lower.
The liquidity below $15 could lead to a 7% LINK correction.
Chainlink [LINK] breached a six-week resistance on the 8th of May, but its follow-through has been underwhelming.
Since then, it tread water at the same former resistance level at $15.5. It has meandered between $14.84 and $18 in the second half of May, unable to conclusively rally higher.
The rest of the altcoin market was also stuck in the doldrums since the 10th of May. In an earlier report, it was noted that Chainlink displayed high Development Activity.
A closer look at on-chain metrics showed that holders were happy to take profits around the $16-$18 region. Since a larger share of holders were in profit due to the move beyond $15, they chose to sell LINK.
At the same time, demand has slowed down. In this scenario, it was understandable that Chainlink was unable to rally.
Price action following the breakout saps LINK bulls’ spirits
Source: LINK/USDT on TradingView
On the daily chart, LINK formed a lower high structure after rejecting $17.42 resistance.
After testing the resistance earlier in May, Chainlink has formed lower highs and equal lows- a triangle pattern. The OBV has been sliding lower over the past three weeks.
In fact, the previous analysis showed selling pressure based on the Mean Coin Age metric, and that has not changed.
Even though the Stochastic RSI formed a bottom and the RSI retested neutral 50, the bearish stranglehold on the market was strengthening.
This was likely to see LINK sink back into the range, and fall as deep as the mid-range support at $13.2.
Source: Coinglass
The 1-month Liquidation Heatmap of Chainlink highlighted a magnetic zone at $14.8. The expected drawdown for LINK in the coming days was close to 8% if this liquidity cluster was tested.
To the north, the local highs at $17.3 and higher had a sizeable amount of liquidations. Due to the lack of demand for Chainlink, a price drop appeared more likely.
Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion
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