The Compound (COMP) price has created a bullish reversal pattern inside a significant support area and is expected to continue moving upwards.
The COMP price has been decreasing since Sept 1, when it reached briefly hit a high of $272.61. On Sept 18, it had bounced at the $145 support area, which is the 0.786 fib level of the preceding upward move.
COMP Hits Double-Bottom
Inside the support area, COMP has seemingly completed a double-bottom, which is normally considered a bullish reversal pattern. The pattern has been combined with lower wicks in both bottoms, a sign of buying pressure.
In the daily time-frame, technical indicators do not show any signs of reversal in the form of bullish divergences or bullish crosses. On the contrary, the successive lower closes are a sign of bearishness.
However, the two-hour chart shows that the double-bottom was combined with significant bullish divergence in the RSI and that the MACD has moved upwards and crossed into positive territory.
Furthermore, the price has reclaimed the previous support area at $160, which was expected to as resistance but broke through without much trouble. Now, the same area is expected to act as support once more.
Cryptocurrency trader @theTradingHubb outlined a COMP chart that predicts the price retracing in the short-term before eventually resuming its upward movement towards new all-time highs.
Beginning on Sept 6, COMP has possibly completed five waves up inside a leading diagonal (in brown below) and then an ensuing A-B-C correction. If so, the movement outlined in green below shows the beginning of the new upward trend.
In this formation, the ratio of waves A:C is 1:1.61, very common in such corrections, giving credence to the possibility of this being the correct count.
If this scenario plays true, the movement outlined above is the first sub-wave (in green) of the third longer-term wave (in black), which is expected to take the price to new all-time highs.
Once the price begins moving upwards, the main resistance level will likely be found between $208-$223, the 0.5-0.618 Fib levels of the entire downward move.
To conclude, it is likely that COMP is in the first stages of an upward trend that is expected to take the price towards new all-time highs.