As Ethereum layer-2 scaling solution Optimism (OP) continues its recovery rally, investors are questioning whether it is too late to buy into optimism. However, significant resistance levels could put an end to the upside momentum.
Optimism has seen a 5% rally since yesterday, as the price continues to make gains in a hard-fought recovery. This comes after a challenging summer for the project, which has seen a 28.5% decline since May.
Currently, OP is trading at $1.55, with a 24-hour change of 1.77%. The recovery rally marks the fifth day of a technical rally structure, with OP bouncing 30% after re-testing lower trendline support on August 17.
But there are potential troubles ahead, as the recovery rally now faces a strong area of resistance from the 20-day moving average (20DMA). A clean break above this level could propel OP higher, as it did in July when the 20DMA provided nearly 30 days of support. However, if OP is rejected at this level, it could lead to a fall back to lower trendline support, with no major support levels below $1.50.
If OP is able to push off the 20DMA, the next target for price action would be the 200-day moving average (200DMA) at $1.91. OP hasn’t touched this level since a death-cross pattern emerged on May 18.
While the recovery rally has given hope to bag holders, there are indicators that suggest caution. The relative strength index (RSI) is rapidly heating up to an overbought signal at 52.69, indicating a potential period of consolidation. The moving average convergence divergence (MACD) also reflects months of downside momentum with a bearish signal at -0.0004.
Overall, OP’s technical structure appears precarious, with the 20DMA resistance zone being a key area to watch in the short term. If the 20DMA flips to support, OP could target a reclaim of the 200DMA at $1.95, a potential gain of 25.73%. However, rejection from the 20DMA could lead to a fall back to lower trendline support at $1.2, a potential decline of 22.6%.
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