Cosmos (ATOM) To Set for a Sharp Correction

    Cosmos (ATOM) is very close to breaking below the corrective pattern formed since June 18, which would likely accelerate the decline.

    Daily Potential

    The daily chart shows that ATOM has been rising inside an ascending parallel channel since hitting a low of $5.54 on June 18. Such channels usually contain corrective movements, which means a breakout is likely to happen.

    The price was rejected by the channel’s resistance line on August 24 (red icon) and since then has been falling. Besides the resistance line, the high also marked a deviation above the $12.40 resistance zone.

    Trader @Incomesharks tweeted a chart of ATOM, indicating that the price seems to continue dropping.

    cosmos-atom-to-set-for-a-sharp-correction 2
    Source: Twitter

    Currently, ATOM barely holds the support line of the channel. If a breakdown occurs, the nearest support level will be at $8.60. This is the 0.618 Fib retracement support level and the horizontal support zone.

    Daily RSI readings support a break below the channel and continuation of the ongoing downward movement. The main reason for this downtrend is that the indicator has broken below the ascending support line and dropped below 50.

    Therefore, both the price action and the indicator suggest that a significant tumble is expected.

    cosmos-atom-to-set-for-a-sharp-correction 3
    ATOM/USD Daily Chart By TradingView

    Wave count

    The wave count shows that ATOM has started a five-wave downward movement after hitting an all-time high in January 2022. If the wave count is correct, the June bottom marked the bottom of wave three (white).

    As such, the ongoing upward movement is part of a pullback containing wave 4, as evidenced by a retest of the midline of the channel connecting waves one and two.

    So, if the price initiates the fifth and final wave, the downtrend can continue until it reaches the $4.50 horizontal support zone. 

    cosmos-atom-to-set-for-a-sharp-correction 4
    ATOM/USD Weekly Chart By TradingView

    (Reference: Beincrypto)

    Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. 

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