The riotous Terra price rally is showing signs of stress. LUNA has dropped 20% and may have more downside ahead in the coming days. Over the last week, LUNA, the coin that powers stablecoin blockchain Terra, has been trading violently between $26.00 and $35.65. This period of price discovery is showing the classic signs of a top.
Following a 530% rally, It’s hardly surprising that LUNA is struggling for direction. On the 20th of July, the coin was trading at $5.52. A month later, LUNA was changing hands at $35.65. This fantastic four-week rally has lifted Terra to the rank of the 15th largest cryptocurrency, with a market cap of $11.4 billion at the time of writing. But even with the crypto market enjoying a return to the earlier form of 2021, the price is looking incredibly stretched and ripe for a correction.
LUNA Coin Price Forecast
Some negative developments have occurred in recent days and the short-term technical outlook appears to be rolling over. Firstly, the rally took the LUNA price deep into overbought territory last week. The Relative Strength Index (RSI) peaked at a staggering reading of 91.36, and despite the price trading broadly sideways since, it is still a lofty 69.25. This suggests the coin is vulnerable to a reversal. Furthermore, the Moving Average Convergence Divergence Indicator (MACD) may also soon turn negative.
Due to the almost vertical ascent, technical support is not seen until a long way below the current price. The first target on the downside is the March $23.30 high, which sits just below the 0.385% Fibonacci retracement level. However, a deeper correction brings the May high of $20.26 into the picture. This is almost perfectly aligned with trend line support and the 50% Fibo retracement level at $20.57. Therefore, the $20.26 is a huge support level.
If the Terra price reverses lower from here, I would expect buyers to emerge as it approached $20.26. And as long as LUNA maintains this price on a closing basis, the uptrend stays in place. However, if the price slides below $20.26, the outlook turns extremely bearish. And in this event, an extension towards the 200-day moving average at $11.11 looks possible.
Terra Price Chart (Daily)
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