SHIB Overheating After Price Soared 75% In 2 Weeks?

SHIB price seems poised for a sharp correction after gaining almost 75% in almost 2 weeks.

SHIB rises above mid-January high

On Monday, amid renewed buying interest in the crypto market, the coin’s meme surged above its highest level since Jan. 18 at $0.00002961. Before bouncing back, the price fell nearly 80% from its record high of $0.0000887.

At the time of writing, SHIB is trading at $0.00003129, up nearly 40% over the past 24 hours.

However, the wild rally price was also approaching the classic sell signal trigger point. The first is the daily relative strength index. RSI is a technical indicator ranging from 0 to 100 to show if an asset is overbought (RSI>70) or oversold.

The second is the daily Relative Volatility Index (RVI), which measures the standard deviation of low and high prices. The RVI has fallen below 50, a sell signal. In the “perfect” scenario, traders close their long positions after the RVI falls below 40. At the time of writing, it is close to 48.

Source: TradingView

Other bearish signals

As if that weren’t enough, many other signs that the price may correct through the following three technical indicators. First, the SHIB token’s current bullish momentum is showing signs of weakening near the 50-day exponential moving average (50-day EMA, red wave in the chart below) at around $0.00002761.

Second, the ongoing SHIB uptrend is being accompanied by lower volumes — meaning they’re nowhere near what they were during the October 2021 bull run. This shows low liquidity in the SHIB market, making it difficult for traders to spot buy and sell orders perform at the desired level.

Markets with less liquidity tend to see larger price swings in both directions.

Source: TradingView

Finally, the price of SHIB is about to attempt a critical pullback at $0.00003358, which coincides with the 0.618 Fib line of the Fibonacci retracement chart, which runs from the swing low of $0.00000507 to the swing high is drawn from $0.00007971. Combined with the alarming RSI and RVI, the $0.00003358 level is considered an ideal risk zone for traders looking to lock in temporary profits.

Shorten SHIB’s train?

Independent market analyst Norok has write that The recent bull run presents a “great short opportunity.” He cites a fractal from November 2021 that shows the SHIB making a fake rally of almost 42% in two days, followed by a 70% drop.

Source: Norok, TradingView

“Not all rallies are the breath of fresh air that aspiring owners want. It can provide great short-term opportunities for many months.

This is a clear pullback to test and hold the resistance zone. It’s a good opportunity to add a short that took profits in early January.”

These statements come as many bearish positions have lost millions of dollars during the recent price rally. For example data from Coinglass shows SHIB-based traders in investment products have liquidated over $10 billion and about 75% of them were short.

However, Binance’s 1,000 SHIB futures product, which contains 1,000 SHIB tokens per contract, appears slightly biased in the bears with a long/short ratio of 0.93 on the adjusted 24-hour timeframe.

Specifically, the long/short ratio represents the number of net long open positions relative to net short positions. A value above 1 indicates that most open positions are too long. Conversely, a reading below 1 indicates that the market trend is currently tilted in favor of going short.

Source: coin jar

Meanwhile, the SHIB futures long/short ratio on FTX is also near 0.97, reflecting the market’s bearish outlook for the adjusted 24-hour timeframe.

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