PancakeSwap witnessed high demand, spurring a rally towards the psychological $3-mark
Liquidity from $2.7 to $2.3 could drag prices south
PancakeSwap [CAKE] seemed to be testing the highs of its five-month range formation at press time. The range extended from $1,37 to $2.95, with its mid-range level at $2.16.
Almost immediately after reaching $2.95, the Binance Coin [BNB] Chain DEX token saw a rejection. In fact, it shed 5.6% of its value in 11 hours after a 22% rally in six hours.
Source: CAKE/USDT on TradingView
Such volatility could be a result of a liquidity hunt. AMBCrypto’s investigation of the liquidation heatmaps gave crucial clues for CAKE traders. The 1-day chart also suggested that traders shouldn’t get euphoric near the range highs.
The OBV has been on an uptrend since early April. The bounce from the mid-range support at $2.16 saw the $2.5 resistance challenged twice in May, before the recent breakout. The MFI was at 67, underlining strong demand and bullish momentum.
Source: CAKE/USDT on TradingView
The 4-hour chart highlighted the rejection from the range highs. In the coming days, it is possible that we see the former resistance at $2.56 act as support. From this level, CAKE bulls could build up their strength for the next rally.
The OBV captured the high buying pressure of the past couple of days. The MFI also reflected bullish momentum, with the same having not formed a bearish divergence yet.
Clues of a deep pullback for CAKE from the liquidation data
Source: Coinglass
While the price chart revealed some bullishness, the five-month range is not a trifling matter. Bulls looked likely to fail in overpowering the level in the coming days. The swift surge from $2.4 to $2.95 can be explained by the build-up of liquidity from $2.85-$3.
Liquidity attracts price, and the allure of this magnetic zone saw PancakeSwap’s price race higher. After a sweep of this liquidity, it may be likely that the DEX token would be forced to fall lower.
Source: Coinglass
The 2-week liquidation heatmap showed a concentration of liquidation levels from $2.7 to $2.2. In particular, the $2.61 and $2.28 levels were short-term price targets for CAKE bears.
Therefore, it seems likely that the PancakeSwap rejection at the $2.95 range high would be followed by a retracement to the mid-range level at $2.16. There could be minor bounces on the way south.
If Bitcoin [BTC] achieves a new all-time high within a day or two, and continues to drive higher, it could reverse CAKE’s sentiment. Such a bullish flip could result in a range breakout. Based on the evidence at hand, traders should expect a pullback on the charts.
Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion