Stacks (STX) has been the standout performer in the cryptocurrency market over the past 24 hours, with its price surging by 16%. This rapid price increase, coupled with a notable spike in trading volume, has garnered attention from investors and traders alike. However, despite the bullish momentum, underlying market sentiment suggests that a correction may be on the horizon, raising questions about the sustainability of the rally.

The Surge in STX Price

The 16% price surge has positioned STX as one of the strongest performers in the market recently. The jump, supported by a significant rise in trading volume, has raised renewed interest among investors. The sudden rally has drawn attention to STX’s potential, especially as the cryptocurrency market has faced some challenges in recent weeks.

However, the price increase has come with a catch. Despite the apparent optimism reflected in the price movement, market sentiment appears divided. On-chain data and futures market activity indicate that many traders are preparing for a possible near-term correction, which could contradict the recent rally.

Short Interest Grows Amid Rally

According to data from Coinglass, STX’s long/short ratio currently stands at 0.95, which is a key indicator of market sentiment. This ratio compares the number of traders holding long positions (expecting prices to rise) to those holding short positions (anticipating a price drop). A ratio below 1 indicates that more traders are betting against the price than in favor of it.

The drop to a 0.95 ratio shows that bearish sentiment is increasing, despite the recent price surge. Traders are becoming more cautious, with many placing short positions, possibly anticipating that the rally is unsustainable or based on short-term speculation rather than long-term fundamentals. This growing short interest suggests that a correction could be on the cards if the price fails to maintain its upward trajectory.

RSI Shows Overbought Conditions

In addition to the growing short interest, STX’s Relative Strength Index (RSI) has reached 72.95, indicating that the asset is nearing overbought conditions. RSI is a widely used momentum indicator that measures whether an asset is overbought (above 70) or oversold (below 30), based on its recent price movements.

When the RSI reaches levels above 70, it often signals that the asset may be due for a price correction. Historically, other cryptocurrencies have seen pullbacks or consolidations after reaching overbought conditions, and STX could be no exception. If the RSI continues to remain in the overbought zone, the price of STX may face downward pressure, possibly pulling the altcoin back toward its previous lows.

Resistance at $1.07: A Critical Test for Bulls

Despite the bearish signals, there is still potential for the rally to continue if demand remains strong. Traders are watching the $1.07 resistance level closely, as it represents the next major hurdle for STX. If the price can break through this level, it could signal the continuation of the bullish trend, invalidating some of the bearish concerns.

Historically, when altcoins with strong community support and use-case narratives break through key resistance levels, they often experience extended bullish runs. However, if STX fails to surpass $1.07, it could strengthen the bearish outlook, and the price may retrace to lower support levels, potentially revisiting its recent low of $0.47.

A Critical Juncture for STX

STX finds itself at a crossroads. The recent 16% price surge, along with the rise in trading volume, demonstrates strong investor interest and potential for further gains. However, the divergence between the price action and market sentiment presents a challenge. The growing short interest and overbought RSI raise concerns that the rally could be short-lived.

Whether STX can maintain its upward momentum will depend on continued buying pressure and broader market support. If the bullish trend continues, the price could break key resistance levels and extend its rally. On the other hand, if skepticism prevails and traders begin to take profits or increase short positions, a correction may soon follow, bringing STX back to lower price levels. Investors will need to watch closely to see how these factors unfold in the coming days.