Ripple’s XRP kicked off the week in the green after slicing through a crucial resistance level. As long as this cryptocurrency holds above $0.65, prices will likely advance to new yearly highs.
XRP Attempts to Resume Uptrend
XRP has broken out of an inverse head-and-shoulders formation that has been developing since late November 2020 on its 4-hour chart. After moving past the pattern’s neckline at $0.65, the altcoin surged by nearly 13% to recently hit a high of $0.73.
Further increase in buying pressure around the current price levels could push XRP’s price by another 55% towards $1.13.
This target is determined by measuring the inverse head-and-shoulders’ widest range and adding that distance upward from the breakout point.
While the odds seem to favor the bulls, it is imperative to note that assets that breakout of inverse head-and-shoulders patterns tend to retest the neckline or breakout point before advancing further. Such downswings help shake out some of the so-called “weak hands” and provide an opportunity for sidelined investors to reenter the market.
Regardless of the optimistic outlook, market participants must be aware that Ripple is undergoing a legal battle against the U.S. Securities and Exchange Commission (SEC) for the unlawful sale of an unregistered security. The legal uncertainty surrounding the distributed ledger startup suggests that anyone trading XRP should keep tight stop-loss orders to avoid potential risks.
It is worth remembering that in early June 2019, the SEC sued Kik for conducting an illegal $100 million initial coin offering. The American financial watchdog sought a permanent injunction, disgorgement, and a penalty, which led to a 90% collapse of the KIN token’s market value.
Disclosure: At the time of writing, this author owned Bitcoin and Ethereum.