Avalanche (AVAX) has seen a significant downward movement in price over the past month, with a steady bearish trend that began in late January. After a retracement of all gains made since November 2024, AVAX has recently shown signs of a possible rebound as it approaches the critical $20 support level. A key technical indicator, the bullish divergence, has emerged, potentially signaling that the token could experience a short-term price rally. However, whether this bounce will be sustained or if it’s merely a temporary correction remains to be seen.

The Bearish Trend and Key Support Levels

Since mid-January, AVAX has consistently dropped in price, breaking through crucial support zones, including the $35 mark. This bearish trend accelerated through February, as the token saw multiple lower lows. The price of AVAX reached a significant low around $22.35, which is now acting as a resistance level. Currently, the most immediate support for AVAX sits at $19.73, a level that proved pivotal in November 2023.

Interestingly, as the price approached the psychological support level of $20, AVAX showed a technical bullish divergence. This means that although the price made lower lows, the momentum indicator (MACD) showed higher lows. This divergence suggests that despite the continued price decline, the selling momentum may be weakening, which could pave the way for a short-term price bounce.

Bullish Divergence and Price Bounce Possibilities

While the bearish trend remains intact, the bullish divergence is a potential signal for a price recovery. Divergence occurs when price movements do not align with momentum indicators, and in this case, the MACD’s higher lows indicate that there may be buying pressure building, even though the price has not yet reflected it. Historically, this type of divergence has often led to short-term price increases, particularly when the price nears key support levels, like the $20 zone.

However, it’s important to note that a single bounce is unlikely to reverse the broader downtrend. For AVAX to break free from its bearish structure, the token would need to form a series of higher highs and higher lows—something that hasn’t occurred in recent weeks. Therefore, while a bounce is possible, it may not lead to a full reversal of the current trend.

Resistance and Potential Price Targets

As AVAX eyes a possible bounce, the immediate resistance is located at the 20-day moving average (DMA), which is situated near $24.24. This level is crucial for AVAX’s short-term price action. If the token manages to break through this resistance, it could set its sights on higher targets, such as $26.54. However, this resistance zone is formidable, and it may be challenging for the price to break above it without strong buying volume or a broader market catalyst.

Furthermore, liquidation data from Coinglass shows that the $27.4 level continues to act as a significant resistance zone, with multiple liquidation levels stacked between $23.4 and $24. This adds to the complexity of a price breakout above $24.

Impact of Bitcoin’s Price on AVAX

Avalanche’s price action has often been influenced by broader market conditions, especially Bitcoin (BTC). The price movements of Bitcoin can impact altcoins like AVAX, and with Bitcoin showing resilience above the $85,000 mark, there’s a chance that AVAX could see some relief if Bitcoin’s momentum continues. However, if Bitcoin experiences a downturn, it could drag AVAX back down to the lower support levels near $19.7-$20, as the broader market sentiment will likely affect AVAX’s price.

Conclusion

AVAX is at a critical juncture. The bullish divergence on the daily chart suggests the possibility of a short-term price bounce, with key resistance levels around $24 to $26.54. However, the broader downtrend is still intact, and a major reversal will require AVAX to establish a new higher-highs pattern. Traders should remain cautious and monitor both AVAX’s price action and the movements of Bitcoin to assess the next steps for the token.