Zcash (ZEC) soared nearly 400% in October and made headlines this week with a 44.2% gain. It has risen another 6.6% in the past 24 hours, indicating strong buying pressure. However, while the price of Zcash continues to rise, signs of depletion are beginning to surface.
Even though Zcash remains within a bullish structure, momentum indicators are currently pointing to a pullback risk.
sponsored
Rebound risk increases as price outstrips momentum
From October 11th to October 29th, Zcash price continued to make new highs, but the Relative Strength Index (RSI) lowered the highs. RSI is a momentum indicator that measures buy and sell strength. If the RSI is falling but the price is rising, it indicates a bearish divergence, indicating that momentum is not supporting the move.
This divergence comes as Zcash is up 400% month-over-month, suggesting that the surge itself now poses an RSI risk. In other words, the price is moving too fast and the RSI is not following it. This imbalance usually suggests a cooldown.
Want more token insights like this? Sign up for Editor Harsh Notariya’s Daily Crypto Newsletter here.
Note: Although this type of bearish divergence on daily charts often indicates a trend reversal, ZEC’s short-term history shows commendable price strength. If Zcash price corrects, its strength could limit the risk of a pullback.
Notably, Zcash is still riding the flag breakout momentum and the broader rally appears to be intact.
sponsored
At the same time, the Chaikin Money Flow (CMF), which tracks how much big money is flowing in or out, has been trending downward since the last few sessions. It is currently hovering around zero, meaning large investors may be locking in profits in exchange for increased exposure.
For Zcash to regain momentum, the CMF will need to turn higher and the RSI will need to rise above 75. When the RSI moves above 75 with rising prices, momentum and price are in sync, at least in the short term. And that can negate the pullback bias.
Protracted liquidation increases pullback risk
The ZEC liquidation map from Bybit alone shows how heavily the market is leaning towards long positions. Currently, over $20.8 million in long leverage has been accumulated, while short leverage is only $10.7 million. This means that most traders are still betting on the upside.
sponsored
Such positioning increases the risk of a long squeeze. This means that a sharp decline will force overleveraged longs to close their positions, causing the price to fall further. Especially with Zcash’s history of volatility, even a small decline can cause this.
The largest liquidation cluster is located between $308 and $295, a high-risk zone if selling pressure increases. Given that ZEC prices react to derivatives, the risk of price decline remains unless leverage cools.
sponsored
Zcash’s bullish price structure remains, but not without risks
Despite these short-term warning signs, Zcash’s technical structure remains bullish. On the 12-hour chart, ZEC is trading within an ascending channel, a pattern that usually leads to an upward breakout.
However, the top of the trendline is weak and has only two touchpoints, so a move above the trendline could be explosive if the bulls regain control. The key level to watch is $365, which has rejected all gains since October 27th.
If ZEC breaks above this, $382 and $400 will be the immediate targets, with $400 acting as a strong psychological barrier. Based on the Fibonacci extension, a close above $400 could open the door to $456 and even $548.
On the downside, $308 remains an important support. A sustained decline below this level could push ZEC towards $267 or $226, turning the current pattern from bullish to correction.
As mentioned earlier, a drop below $308 could also trigger a long-term liquidation. This could even break the bullish channel structure and push Zcash price below $267.
