Chart of the Week: Helium’s 158% Rise May Be Nearing a Turning Point

Helium (HNT) has gained 158.15% since the beginning of July, showing a strong upward trend. The key question now is whether HNT will continue its upward trend or whether a pullback is on the horizon.

While Helium’s (HNT) bull run has been exciting, it could soon turn into a disappointment for investors. The lack of consolidation or pullback during this rally has raised concerns that one could be on the horizon. Here’s why a pullback could be imminent.

Moving Average Convergence/Divergence

Looking at the daily moving average convergence divergence (MACD), we notice that the histogram is shifting from dark green to light green, indicating that the bullish momentum is waning. The MACD lines are also starting to converge, suggesting that the current uptrend may be losing steam. A potential bearish crossover could signal a trend reversal.

RSI and Stochastic RSI

Both the Relative Strength Index (RSI) and Stochastic RSI are in overvalued territory, with readings above 60. Historically, when the RSI and Stochastic RSI reach 60+ levels, they tend to decline significantly, often accompanied by a sharp drop in price.

Support and resistance levels

The current price action shows strong resistance levels at $8.5 and $10. These levels have proven to be difficult to break or act as strong support levels in the past. Meanwhile, the $7 level serves as a weak area. It currently acts as resistance, but its role may change if HNT breaks above it. If the price fails to break $7, a more pronounced downtrend is likely to begin.

Fibonacci Confluence Levels

By applying Fibonacci retracement levels from three different time frames—the initial trading day to the recent high, the June low to the recent high, and the March high to the June low—we identify several confluence levels. These confluence levels cluster around $6 and $4.7.

The area between $4.7 and $6 forms what we call the “opportunity shelf.” This range represents a potential target area for a short position, with the expectation that HNT could return to this area if the downtrend continues.

Historical support is at $3, but a drop to that level seems unlikely unless there is a significant negative event in the broader market, similar to what happened with the surprise Japanese interest rate hike and the Jump Trading sell-off in late July and early August.

Strategic considerations

Before going short, it is important to confirm the downtrend. Although the trend has recently changed, there is always the possibility of a bear trap. To minimize the risk, we recommend waiting for HNT to fall below $6.3958, which is the 23.6% Fibonacci retracement of the June low to the August high. Once HNT breaks below this level and acts as resistance, the short selling opportunity becomes much safer.

Another factor to consider is the visible volume range profile, which shows a weak volume area between $5.5 and $6.5. Prices tend to move quickly through these low volume areas, further confirming the likelihood of a move lower. However, HNT is currently in a high volume area, which could potentially serve as a consolidation area.