It looks like Phantom (FTM) will reach a new all-time high in the coming sessions after its price fell 125% from $1.23 on December 14, 2021 to $2.84 on January 3, 2022, triggering a classic bullish reversal.
The pattern is called Inverted Head and Shoulders (IH&S), the pattern appears when the asset forms three bottoms below what is called neck resistance, with the middle bottom (the head) deeper than the left and right shoulder.
The FTM price has recently followed a similar price trajectory as shown in the chart below. As a result, the FTM has full resistance in the $2.55 to $2.74 range, which includes the length of the inverted head and shoulders.
FTM / USD daily price chart in an inverted head and shoulders pattern. Source: TradingView
Can Ghost grow another 50%?
In the ideal world, an IH&S pattern would usually produce a bullish breakout when the price decisively closes above the neckline. Ideally, the overhead target would be equal to the maximum head-to-neck distance measured from the point of explosion.
On Monday, the FTM nearly completed the IH&S formation, hitting the neck. As a result, the next move for the Phantom coin might be an upward breakout of the $2.55 to $2.74 resistance range. At the same time, it will strive to grow to $4.33, based on the chart shown in the diagram below.
FTM/USD daily price chart showing IH&S breakout setup. Source: TradingView
A sharp drop in prices from the neck region, accompanied by an increase in volume, threatens to invalidate IH&S planning. If so, the next ideal helpline might be around $2.08. This will depend on the scope of the Visible FTM Volume Profile (VPVR), an account that shows trading activity during a specified period at specified price levels.
FTM/USD daily price chart with target volume profile. Source: TradingView
Is there a risk of overvaluation?
The downside risk in the Phantom market has also manifested itself in the form of the Relative Strength Index (RSI), a calculation that measures the magnitude of recent changes in an asset’s price to gauge whether it is overbought or oversold.
Briefly about the relative strength index. Source: Investopedia
In particular, the daily FTM entered overbought territory on January 3 when the reading jumped just above 70. The technical indicator indicates that the FTM is overbought and should undergo some correction to neutralize the market sentiment.
From a layman’s perspective, an RSI reading above 70 is usually seen as a sell signal. However, selling does not necessarily occur immediately after the RSI jumps into the overbought territory.
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Based on several RSI corrections found between August and September 2021, FTM price appears to be extending its upward momentum even after the index crossed the 70 mark. At best, the daily RSI reached nearly 89 on September 9, which Coincides with the price of FTM… it reached an all-time high of $1.99.
Daily chart of FTM/USD price with corrections affected by RSI. Source: TradingView
This gives the FTM a chance to meet IH&S’s target of $4.33, despite the risks of overvaluation. That could be followed by a correction of its 20-day EMA (20-day EMA; green wave in the chart above) around $2.09.
This will bring the price of the VPVR support closer to $2.08 as discussed above.