Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion
- At press time, Optimism was on track to reverse last week’s losses.
- The derivatives market was gradually shifting to bullish.
Optimism [OP] is fixated on becoming the go-to Ethereum [ETH] Layer-2 scaling solution of choice. A recent report established the network outperformed Arbitrum [ARB] on transactions and costs. The native token, OP, reacted positively to the development and sought to reclaim last week’s losses.
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However, OP’s recovery was headed to a roadblock that could expose the token to elevated sell pressure and possible price reversal.
Will sellers exploit the roadblock?
Source: OP/USDT on TradingView
Last week’s (14 – 20 August) extended bearish pressure pushed OP to crack the $1.379 support. But the drop eased at the weekly bullish order block (OB) of $1.17 – $1.34 (cyan), allowing the bulls to front a recovery.
At the time of writing, price action appeared ready to clear the immediate resistance level at $1.50. However, bulls will face another hurdle and the weekly bearish OB of $1.55 – $1.77 (red) if they clear the $1.50 obstacle.
Sellers could exploit the above resistance levels as Bitcoin [BTC] struggled to stay above $26k. If so, a price reversal could offer a shorting opportunity with an entry at $1.55 and a take-profit target of $1.40.
An H12 candlestick session close above $1.61 will invalidate the short set-up. In such an upswing scenario, the retest of $1.70 could be feasible.
The Chaikin Money Flow (CMF) was above zero, indicating massive capital inflows into OP’s market. But the Relative Strength Index (RSI) hadn’t decisively crossed above the 50-mark. An RSI rejection at the median level could signal sellers’ re-entry.
Short positions discouraged
Source: Coinglass
How much are 1,10,100 OPs worth today?
According to Coinglass, more short positions ($264k) were liquidated than longs ($162k) approximately 12 hours before the time of writing. The trend captures a building bullish bias in the derivatives market.
But the spread, about $100k, wasn’t too big to confirm further upside was likely. Nevertheless, on the derivatives side, Open Interest rates and volume increased by 10% and +40%. So tracking BTC movement was crucial.
