Pi Network [PI] was one of the altcoins in the spotlight. With a 43.1% rally from Thursday’s low at $0.132, PI traders and investors might be tempted to buy the token. The buying idea becomes even more tempting when the gains are compared to leading crypto assets.
Bitcoin [BTC] was up 8.3%, and Ethereum [ETH] was up by 9.2% in the same time period. Yet, traders should be cautious and not give in to FOMO or arguments of relative strength.
Assessing the bullish argument
The Pi Network upgrade was one of the reasons behind the token’s strong recent gains. AMBCrypto reported that the shift toward a decentralized mainnet was a step forward in transferring responsibility from the developers to the community.
A breakout from a long-term descending wedge was also demonstrated. This has the potential to send prices to $0.267-$0.28.
However, the picture remained bearishly biased at the time of writing. The local supply zone at $0.20 remained resolute in the face of a buying frenzy.
Why buyers should be wary of the PI rally
Source: PI/USDT on TradingView
The volume indicators were neutral at best, despite the high trading volume. The OBV was a noticeable distance from making a new high, and the CMF on the daily timeframe
The 1-day chart reinforced the importance of the $0.2 resistance. The recent, swift gains reaching and facing rejection at this band of supply were not a good development.
This is because, counter-intuitively, the high-volume surge into a key resistance area is generally followed by buyer exhaustion and a retracement of all the gains made. In other words, smart money tends to use these moves to sell.
Traders can wait for a breakout past $0.2 and a retest of the same as support to buy. Given the wider market sentiment, this was a highly risky endeavor.
Instead, swing traders and investors can maintain their bearish bias, which is in agreement with the longer-term downtrend.
Final Summary
- The Pi Network token prices saw a strong rally to break out of a descending wedge at the same time as the network upgrade announcement came out.
- The quick move into the overhead supply zone on high trading volume, and the rejection in recent hours, has a good chance of turning out to be a sign of buyer exhaustion and not conviction.
Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion.