AVAX Capitulation Bounce Under Heavy Supply: Favor Selling the Relief Rally

Market context & structure (Daily)

• Current price: $9.973
• Higher-timeframe trend: Persistently bearish.
  • From early Nov ($18.9) to now ($10): a sustained sequence of lower highs / lower lows.
  • January specifically shows a strong breakdown: from mid-Jan ~$14.6 down to ~$10.

Key daily inflection points

• Major distribution-to-breakdown zone: ~$12.7–$13.9 (multiple failures and rollovers).
• Recent breakdown leg:
  • 2026-01-28 close: $12.06
  • 2026-01-29 close: $11.03 (large red day)
  • 2026-01-30 close: $10.86
  • 2026-01-31 close (latest candle): $9.97 with low $9.56
• This is a classic capitulation / acceleration phase: sharp daily range expansion and heavy volume.

Volume (daily)

• Latest daily volume: ~662.5M, higher than prior two days (~503M, ~475M) and elevated vs many earlier sessions.
• Interpretation:
  • Elevated volume into the drop typically signals panic selling + forced liquidation.
  • It can mark a near-term tradable low, but trend-following bias remains bearish until price reclaims broken levels.

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Intraday behavior (Hourly, last ~24h)

Intraday trend

• Hourly sequence shows a steady drift down from ~$10.87 → ~$10.45, then a sharp sell impulse to ~$9.77 and a bounce to ~$9.97.
• The low was printed around $9.54–$9.56.

Microstructure read

• The move from ~$10.45 to ~$9.77 is an impulsive leg (likely stop-run/liquidations).
• The rebound to ~$9.97 is a relief bounce, but price is still well below prior intraday breakdown area.

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Support / Resistance mapping (price action)

Supports

1. $9.55–$9.60: session low / current pivot support.
2. $9.75–$9.80: intraday consolidation after the flush.

Resistances (overhead supply)

1. $10.10–$10.20: intraday bounce ceiling area (seen during the drop).
2. $10.45–$10.55: prior breakdown shelf (multiple hourly prints earlier).
3. $10.85–$10.90: prior day/hourly opens—now major resistance.

Conclusion from S/R: price is trading under layered resistance, meaning rallies are likely to be sold unless a strong reclaim occurs.

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Trend & moving-average logic (inference from data)

Even without explicitly computing MAs, the daily path indicates:

• Short-term averages (e.g., 9/20-day) would be sloping down.
• Price is far below the January trading area (~$12–$14), implying price < medium MAs < long MAs (bear stack).

MA-based bias: bearish continuation or weak mean-reversion rallies that fade.

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Momentum (RSI-style reasoning)

• The last several daily candles show strong downside momentum and range expansion → likely oversold on RSI.
• Oversold does not mean bullish trend reversal; it usually means:
  • downside may slow,
  • bounces happen,
  • but bounces often fail under resistance in a downtrend.

Momentum takeaway: expect a choppy/mean-reverting bounce attempt, but the path of least resistance remains down unless $10.45+ is reclaimed.

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Volatility (ATR-style reasoning)

• The latest daily range: High ~$10.87 / Low ~$9.56 ≈ $1.31 (~13% of price).
• Volatility is elevated; therefore:
  • tight stops are more likely to be hit,
  • better entries typically come from selling into rallies (in a downtrend) rather than selling breakdown lows.

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Pattern/formation read

• Descending structure since Jan 13 peak (~$14.74) with successive breakdowns.
• The hourly action resembles a flush-and-bounce (liquidity sweep) which often retraces into supply, then resumes down.
• No evidence yet of a clean reversal pattern (e.g., higher low + break of structure). For reversal confirmation, you’d want:
  • a higher low above ~$9.55, and
  • a reclaim and hold above ~$10.45–$10.55.

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24-hour forecast (probabilistic)

Given:

• dominant daily downtrend,
• heavy volume selloff (capitulation-like),
• current bounce sitting below multiple resistances,

Base case (most likely):

• A corrective bounce toward $10.10–$10.30 (possibly up to $10.45) gets sold.
• Price drifts back toward $9.70, with risk of a retest of $9.55.

Bear continuation scenario:

• Failure under ~$10.20–$10.45, followed by a breakdown below $9.55 → extension toward $9.10–$9.30.

Bull surprise scenario (lower probability):

• Strong reclaim above $10.45 and acceptance → squeeze toward $10.85–$10.90. (This would require clear strength that is not yet present.)

Net: downtrend + overhead supply → favor shorting rallies.

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Trade plan decision

Decision: Sell (Short Position)

Rationale:

• Higher timeframe trend is bearish.
• Current price is below key resistance layers.
• The bounce from $9.55 looks like relief/mean reversion, likely to be sold into.

Optimal open (entry)

• Prefer not to short at $9.97 (mid-bounce, close to support). Instead, short into resistance:
• Open Price (sell): $10.18
  • This sits in the first meaningful overhead supply zone ($10.10–$10.20) where bounces often stall.

Take-profit / close

• Close Price (take profit): $9.62
  • Just above the flush low zone ($9.55–$9.60) to improve fill probability.

(Risk note for execution: if price instead reclaims and holds above ~$10.45, the short thesis weakens materially.)