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Overbought TRON Can Tumble 30% Against Dollar

TRON became the 7th largest cryptocurrency by market cap following a 135% surge in the last month. It surpassed Litecoin and Stellar on its way up and is now within a striking distance of Tether in the sixth place.

TRXUSD’s recent performance can easily convince investors it is time to join the bulls. The problem with following bullish headlines though, it that they are not indicative of future results. The news simply informs you about what has already happened, which may differ significantly from what lies ahead.

So instead of extrapolating the past, let’s take a look at the 4-hour chart of TRON through an Elliott Wave perspective.

TRON cryptocurrency Elliott Wave setup

The 4h chart of TRXUSD reveals that the structure of the rally from 0.0111 to 0.0358 is impulsive. It can be labeled 1-2-3-4-5 and the sub-waves of wave 3 are also visible.

According to the Elliott Wave theory, a three-wave correction follows every impulse. This means that TRON has been in pullback mode since the top of wave 5 at 0.0358 on January 10th. The decline to 0.0212 must be wave A, suggesting the current recovery to 0.0312 so far is wave B.

If this is the correct count, wave C down can be expected to begin soon. As long as TRXUSD trades below 0.0358, the support area of wave 4 near 0.0180 looks like a reasonable bearish target.

Another reason not to trust the bulls is the RSI indicator, which shows TRON has reached overbought territory. The last three times that happened was near the highs of waves 1, 3 and 5. In all three cases, a pullback occurred shortly after.

In our opinion, this is not a good time to buy TRON. Crypto enthusiasts can see its market cap decline by over 30% soon. A plunge below 0.0200 seems to be lurking ahead.

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