XRP, the cryptocurrency primarily used for payments, is currently trending and appears to be prepping for another substantial surge. This is the inference drawn from both the price graph and the activity in the options market.
Despite a 10% decrease this week, the crypto coin’s fall has formed a bullish flag. This term in technical analysis refers to a pattern that typically slopes counter to the prior steep uptrend and frequently triggers a boost for future gains.
“The breakout is typically anticipated to follow the direction of the previous trend, especially if it is abrupt and steep,” explained Charles Kirkpatrick, a certified market technician and head of Kirkpatrick & Company, Inc. He also notes in his book “Technical Analysis, the Complete Resource For Finance Market Technicians,” that flags that are preceded by a rise of 90% or greater almost never fail and have an average return of 69%.
XRP has been exhibiting a bullish flag following an almost 500% surge to $2.9 within the four weeks leading up to Dec. 3. If a breakout occurs, the potential for a rally to $5 is plausible. This possible level is determined by adding the magnitude of the previous uptrend to the breakout point, currently around $2.5, a method known as a measured height method in technical analysis.
Interestingly, the $5 strike call options on the Deribit platform are experiencing a surge in activity, indicating a potential upward move beyond that level.
The $5 call has been the second most traded XRP option in the last 24 hours, with a volume of 1.7 million contracts, reports data source Amberdata. (One contract represents 1 XRP).
In addition, data from Deribit shows that the $5 call is the most popular out-of-the-money or higher strike call option with an open interest of 1.25 million. The increased activity suggests bullish positioning, assuming the buyers are traders and not market makers.
However, it’s important to note that technical analysis patterns may not always deliver as predicted, and options market positioning can change rapidly based on evolving price trends. Therefore, keeping an eye on the overall market sentiment is crucial.
