Stacks (STX) has broken out of a bullish long-term pattern after the RSI produced a significant bullish divergence.
STX has been falling since reaching an all-time high of $3.25 in December 2021. The downtrend so far has led to a low of $0.30 on June 15, 2022. The price has been rising since then.
An interesting development is that prices have broken out of the long-term falling wedge that has been in place since the aforementioned all-time high. A wedge is considered a bullish pattern, which means it leads to a breakout most of the time.
Before the breakout, the wedge had been in place for 221 days.
If the advance continues, the nearest resistance will be at $1.45. This is the 0.382 Fib Retracement resistance and horizontal resistance area.
Divergence leads to breakthrough
A closer look at the daily chart reveals a very significant bullish divergence on the daily RSI prior to the breakout. Such divergences often lead to bullish trend reversals.
Additionally, the RSI has broken above the highs between the divergences and surpassed 50, adding to its legitimacy. Both readings are considered signs of a bullish trend.
Therefore, the RSI support continues to move up to the resistance area outlined earlier.
STX wavenumber analysis
Since the aforementioned all-time high, STX appears to have completed a five-wave downward movement (black) in the shape of an ending diagonal. Among them, the fifth wave ended right at the 1.61 outer retracement of the fourth wave (white). As such, a sharp rebound is now expected.
If this count is correct, the upward movement is likely to continue until the 0.382 Fib Retracement resistance at $1.46.
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