The Phantom (FTM) is set to hit a new record high in the coming sessions, with 125% of its price rising from $1.23 on December 14, 2021 to $2.84 on January 3, 2022, triggering a classic bullish reversal setup .
Dubbed Inverse Head and Shoulders (IH&S), the setup appears when an asset forms three troughs below the so-called neckline resistance, with the middle trough (head) being deeper than the left and right shoulders.
The price of FTM has recently gone through a similar price trajectory, as shown in the chart below. As a result, FTM has a common resistance in the defined range of $2.55 to $2.74, which includes the length of the inverted head and shoulders pattern.
Can the Phantom rally another 50%?
In an ideal world, an IH&S pattern would usually result in a bullish breakout when the price closed decisively above the neckline level. Ideally, when measured from the breakout point, the upside target should be equal to the maximum distance between the head and neckline.
On Monday, the FTM nearly completed its IH&S formation by reaching its neckline. As a result, the next move for the Phantom coin could be a bullish breakout above the $2.55 to $2.74 resistance range. Doing so, it will move towards $4.33 based on the setup presented in the chart below.
A sharp drop in price from the neckline range, coupled with an increase in volumes, would risk invalidating the IH&S setup. In this case, the next ideal support line could be near the $2.08 level. This will be based on FTM’s Volume Profile Visible Range (VPVR), a metric that displays trading activity at specified price levels over a specified period.
Are there risks of overvaluation?
Downside risk in Phantom Markets is also reflected in its relative strength index (RSI), which is a metric that measures the magnitude of an asset’s recent price changes to evaluate its overbought or oversold conditions.
In detail, on January 3, the daily RSI for FTM entered an overbought zone as its readings jumped marginally above 70. Technical indicators suggest that FTM is overbought and should undergo some degree of correction to neutralize the market sentiment.
In layman’s terms, an RSI reading above 70 is usually seen as a sell signal. However, selling is usually not necessary after the RSI jumps into the overbought zone.
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Based on the multiple RSI corrections observed between August and September 2021, FTM price appears to be extending its upward momentum even after the indicator is above 70. At its best, the daily RSI reached around 89 on September 9, coinciding with the FTM price. reached a record high of $1.99 at the time.
This somewhat leaves FTM with the potential to pursue its IH&S profit target of $4.33 despite its overvaluation risks. This could be followed by a correction to its 20-day exponential moving average (20-day EMA; green wave in the chart above) near $2.09.
As discussed above, this will bring the price closer to the VPVR support at $2.08.
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 involves risk, so you should do your own research when making a decision.
