Polygon MATIC’s native token has been steadily depreciating since its recent rejection at the $2.42 resistance level. The $2.12 support is considered a significant area, but MATIC has dipped below it in recent days. A day before press time, MATIC appeared to have broken out of this area in a bullish move but almost immediately reversed. The push up is a search for liquidity and a trap to catch late buyers and force them to sell, adding more liquidity to the downside move.
Source: MATIC/USDT on TradingView
In a previous article, it was noted that MATIC found some support at $2, while $2.12 was resistance. Price seems to have broken through this zone (cyan box) on good volume.
However, MATIC just follows the path that Bitcoin has taken. It pushed up, encouraging market participants to buy a possible spot. After that, the bears pulled the trigger and a wave of selling saw the price drop back to $2.12. However, at this level, the breakout buyers and those looking to sell or short the MATIC were in the same boat. This situation is known as “double pressure” to the downside when both potential buyers and sellers are in a position to be forced to go with the market and sell.
The demand evaporated and the price quickly dropped back to the $1.93 level and, in recent hours, has retested this level as resistance.
Theoretical basis
Source: MATIC/USDT on TradingView
The RSI on the hourly chart has steadily increased and reached overbought levels as MATIC rallied past $2.12. A normal breakout shows the RSI falling back towards neutral 50 and climbing again. But this false breakout saw the RSI plummet along with the price, straight to oversold levels.
The Stochastic RSI is also in the oversold zone and once it resets, further losses could continue.
Inference
In the short term, buying MATIC will go against the trend and sentiment in the current crypto market. Bitcoin is below the $40.5k mark and its next support lies at $37.3k. The rest of the crypto market could suffer losses along with Bitcoin. This also happened after stock markets around the globe took a hit. For MATIC, the next level of significance lies at $1.76 and a bounce from there could be seen.