Elrond (EGLD/USD) has been on a tear over the course of the last two sessions. After bouncing at a significant area of support in the $220s on Monday, the cryptocurrency has now surged as high as the $270s, a more than 20% rally. EGLD/USD is now probing last Friday’s highs at $280, though still has some way to go to recover back to last week’s double top in the $315 area.
Short-term bullish breakout
The latest push high comes amid a surge in technical buying after Elrond broke to the north of a significant medium-term downtrend that had been capping the price action all the way back to the November 23 record high. Since then, EGLD has pulled back from nearly $550 per token, so at Monday’s lows, that amounted to a drawdown of nearly 60%.
But the recent bullish break signifies that the recent bearish trend is over, for the time being at least. Short-term technical bulls will be targetting a test of last week’s double top around $315 and then on an even more significant area of resistance just above it in the $320-$340 area. This has been a significant balance area (of both support and resistance) in recent months, is where the 21 and 50-day moving averages reside and coincides with an important uptrend that Elrond fell below in early December.
If the bulls can push the cryptocurrency back to the north of this area, there wouldn’t be much (technically speaking) to prevent a rally all the way back to record levels.
Long-term bearish risk
But pushing above the $320-$340 zone will be a significant battle as many longer-term bears may see a recovery to this area as a good re-entry point to load up on shorts. The early December break below the long-term uptrend that has supported EGLD/USD price action going all the way back to mid-July signified and end to the Q3 to early Q4 bull run.
The implication is that EGLD has likely re-entered a period of consolidation. Failure to recover back to the $320-$340 region and to break above it would be a confirmatory signal. Long-term bears, or traders just seeking to “play the range” may use such a recovery as an entry point to ride EGLD all the way back to recent lows in the $220s. Indeed, $220-$340 could well become the medium-term range.
Just as a break above this range would open the door to a return to record highs in the mid-$500s, a break below this range would signal a move back under $100 towards early summer lows in the $50s-$60s would be on the cards.