The XRP price almost shot to its highest three-month high after a continuation of the strong uptrend on August 14th. However, its wild weekly acceleration has triggered overvaluation risks, thus increasing the possibilities of an imminent price pullback.
In detail, the XRP/USD pair rose 11.78% to reach $1.20 for the first time since May 22nd. The pair’s gains appeared as part of a prevailing uptrend that began on July 20, when it was trading as low as $0.154 – the 134% upside retracement overall.
In the week to date, XRP/USD rates have risen about 54%.
The latest bullish movements in the XRP market have prompted two classic indicators to predict impending price corrections.
The first indicator is the relative strength indicator (RSI). Represents a magnitude of price changes to assess overbought or oversold conditions. In detail, the RSI fluctuates between zero and 100, with a reading above 70 showing overbought and a reading below 30 showing oversold conditions.
If the asset’s RSI stays above 70, it usually asks traders to sell it at higher prices to ensure maximum profits available. Likewise, if the RSI falls below 30, it creates opportunities for traders to buy the asset at an apparently lower rate.
The daily XRP/USD RSI triggered excessive valuation warnings after its readings crossed above 70. As a result, the pair experienced a modest sell-off near its local high of $1.20, falling to $1.14 at the time of Publication.
The second indicator is the Bollinger Bands.
They 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 bands. When the price leaves the band, it tends to immediately move into the band area.
The latest volatile XRP/USD move has pushed its rates out of the upper band resistance, signaling an overvaluation. As a result, its probability of correction below the upper band level appears high, which may later follow with an extended move towards the 20-day simple moving average (orange wave) near $0.80.
Anticipated additional earnings
Despite the risks of overvaluation, other traders believe the XRP is ready to continue its bull run. For example, independent market analyst DonAlt believes the XRP could soar towards its highest point simply because it broke above the so-called resistance area, as shown in the chart below.
“Almost above the red ($1) this week and I don’t see a reason the XRP won’t make new ATHs,” the analyst said, adding:
“But at the same time, if it’s ATHS, the end of the race is near.”
Kevin Cage, another popular chart analyst, added a dose of fundamentals to the bullish outlook, noting that XRP at its all-time high would mean Ripple has reached an agreement with the US Securities and Exchange Commission (SEC).
The US securities regulator filed a lawsuit against Ripple in December 2020, alleging that the latter became involved in this illegal offering of securities through the sale of XRP tokens in 2013 and beyond. Ripple denied the charges.
On Aug. 16, Ripple will respond to the SEC’s motion to discover “terabytes” of Slack communications data. The documents, if filed, can clarify whether or not Ripple has sold XRP to its investors as bonds.
— James K. Filan (@FilanLaw) August 12, 2021
The views and opinions expressed herein are those of the author alone and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you must conduct your own research when making a decision.
Follow us on social media
Follow our profile on Instagram and in the telegram to receive first-hand news!