Terra (LUNA) has validated it corrective structure by bouncing on Jan 31 – but is it possible that this could be the catalyst for a considerable relief rally?
LUNA has been decreasing since reaching an all-time high price of $103.60 on Dec 27. The downward movement has been contained inside a descending parallel channel.
On January 31, the token bounced at the support line of the channel (green icon), validating the structure in the process. In addition to this, it created a bullish engulfing candlestick.
However, LUNA has yet to create a higher low, which would indicate that an upward movement is expected. Measuring from the all-time high, it has so far decreased by 52%.
Short-term movement
Cryptocurrency trader @TheEuroSniper tweeted a chart of LUNA, stating that the token could increase all the way to $54.
The two-hour chart shows that LUNA has bounced at the 0.618 Fib retracement support level (white) after briefly deviating above it. It is now approaching a descending resistance line that has been in place since January 23.
If it manages to break out, the next closest resistance area would be at $54. This is the 0.382 Fib retracement resistance level and a horizontal resistance area, increasing its significance.
LUNA wave count analysis
The most likely wave count indicates that LUNA has completed wave three of a five wave upward movement (white) that began on Jan 2021. Therefore, it is likely in wave four, which is corrective.
There are several possibilities as to the sub-wave count that would complete wave four, the most likely being a flat (black) or a triangle (red correction).
While it is not yet certain which will transpire, both indicate that a considerable bounce will occur prior to another fall which would complete the correction.
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