Algorand sellers dry up as ALGO recovery to $2.50 begins

Algorand price develops a rare bullish reversal pattern.
Short sellers start to get trapped, feeling the pressure as ALGO ticks higher.
Downside risks are present but limited.

Algorand price has given bulls and bears an extended headache over the past three months. A series of false breakouts higher and lower have yielded a prolonged range trade that warned of some deeper moves south, but that may no longer be the case.

Algorand price forms big bear trap, 75% gain up ahead

Algorand price is developing one of the rarest and most sought-after bullish reversal patterns in Point and Figure Analysis: the Bullish Shakeout. The Bullish Shakeout pattern is only valid during an uptrend and shows up near or at the bottom of a corrective move. The pattern requirements are two to three Os below a triple-bottom (minimum of two Os, maximum of three Os) at the bottom of a swing.

Adding to the strength of this pattern is how it affects short-sellers. A breakout below a triple-bottom is a potent short signal and one that many Point and Figure traders regard as the minimum of criteria for an entry. However, when the triple-bottom fails to produce a sustained move lower, short-sellers get trapped. And as prices move higher, the trapped shorts end up turning into buyers and exacerbating the buying pressure.

Algorand has fulfilled all of the conditions for a Bullish Shakeout, and because of that, a long opportunity now exists. The theoretical long entry is on the 3-box reversal with a buy stop at $1.375, a stop loss at $1.25, and a profit target at $2.50. This trade represents a 9:1 reward for the risk opportunity. A three-box trailing stop would protect any implied profit post entry.

ALGO/USDT $0.025/3-box Reversal Point and Figure Chart

As bullish as this trade setup is, its entry rules are particular. No more than three Os can develop below the triple-bottom. This means that if Algorand price moves to $1.2250 or below, the long setup is invalidated.

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