Chainlink Price rises 40% to $19.78, Can LINK sustain the Uptrend?

The Chainlink price is up 40% over the last ten days to $19.77 reached on Feb. 7, the highest level in over two years.

Even though there are several catalysts behind this price action, the low price momentum points to a potential bull trap.

One of the main catalysts behind LINK's price action is the number of previously dormant wallets which have recently been activated. This led to a spike in the "Age Consumed" metric, according to data from Santiment. The sudden deployment of old LINK tokens into circulation has contributed to the price jump, noted Santiment.

The market intelligence firm added,

 "… the network had seen minor liquidations of wallets, which is often a sign of #FUD that can contribute to further price rises."

More data from Messari shows that supply held by wallets with more than 10,000 LINK tokens has rebounded after the dormant wallet news, suggesting that rich traders are accumulating.

Number of addresses holding over 10,000 LINK tokens. Source: Messari

Blockchain transaction tracking firm ​​Lookonchain noticed "that a total of 47 fresh wallets withdrew 2,237,504 $LINK ($42.38M) from #Binance in the past 2 days!"

This indicates a growing holding behavior among traders amid the price gains.

While on-chain data points to a possible price upswing in the near-term, a closer examination of the LINK's price action on the weekly timeframe reveals a negative divergence which hints at a potential trend reversal.

Is LINK's recent upsurge a bull trap?

Chainlink's price action on the weekly chart has led to a growing divergence between its value growth and bearish relative strength index (RSI).

This means that inspite of the LINK price rising, there is weak momentum behind the buying pressure.

In addition, the price strength at 68 paints near overbought conditions that typically increases correction risks for the underlying asset.

LINK/USD weekly chart. Source: TradingView

This bearish technical setup grows more plausible as LINK approaches the support-turned-resistance trendline around the $20 psychological level. Historically, this trendline has initiated broader correction periods when tested as resistance.

​​Therefore, the Chainlink price risks falling toward its next support line at $16 over the next few days if it fails to produce a decisive close above $20.

Further down, the 50-week exponential moving average (50-week EMA; the yellow wave) at $11.16, is another level to watch on the downside.

On the upside, breaking above $20 could push LINK toward $25 and later $30, over the coming weeks.