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XRP’s current bearish divergence setup mirrors the technical pattern seen in 2018, which preceded an 80% price correction.
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January’s XRP price rally risks hitting a point of exhaustion due to an emerging bearish reversal signal.
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“The recent surge in XRP’s price trajectory has sparked concerns of a potential pullback,” stated a COINOTAG analyst.
XRP’s price faces potential correction as bearish divergence signals indicate exhaustion; analysts predict critical support levels could be tested soon.
XRP Price Chart Hints at 25% Correction
XRP has surged nearly 50% in January, briefly topping $3.39 on Jan. 18, its highest level in nearly seven years. However, the explosive rally may face headwinds, with technical indicators signaling a potential downside correction of up to 25%.
A key concern is the emergence of a bearish divergence between XRP’s price and its daily Relative Strength Index (RSI). While XRP has been climbing to multi-year highs, the momentum oscillator RSI has trended lower, forming a descending pattern.
This divergence indicates that the upward momentum behind XRP’s rally is weakening, raising the likelihood of a reversal in the coming days or weeks.
XRP/USD daily price chart (Binance). Source: TradingView
Additionally, XRP’s price remains significantly above its 50-day exponential moving average (50-day EMA; the red wave), a key technical support level.
As of Jan. 18, the 50-day EMA sits near $2.28, approximately 25% below XRP’s current price of $3.07. Historically, overextended price rallies tend to revisit their EMA levels as traders lock in profits and the market stabilizes, as shown in the 80% correction following a bearish divergence signal in 2018 below.
XRP/USD daily price chart featuring 2018’s bearish divergence correction.
Moreover, XRP’s latest rally has brought its RSI reading to 66.87, approaching the overbought threshold of 70.
While not yet overbought, the RSI’s declining trend suggests waning buying pressure at current levels, which could amplify selling pressure toward the $2.28 downside target.
Is the XRP Bull Run Over?
As noted above, XRP’s bearish divergence raises the likelihood of a pullback toward $2.28, which aligns with the upper trendline of its prevailing bull flag pattern.
A bull flag pattern forms when the price consolidates inside a downward-sloping parallel channel after a strong uptrend. It typically resolves when the price breaks above the upper trendline and rises by as much as the previous uptrend’s height.
XRP/USD daily price chart. Source: TradingView
XRP has already entered the breakout stage of its bull flag pattern. However, after a breakout, the price often retests the pattern’s upper trendline to confirm it as new support.
Such a retest validates the breakout and provides an entry point for new buyers. A successful bounce from the upper trendline strengthens the bullish case and sets the stage for a move higher toward the original upside target.
In XRP’s case, the bull flag’s upside target is around $4.42, up 40% from current price levels. Additionally, XRP’s long-term outlook remains optimistic, supported by the potential launch of spot XRP exchange-traded funds (ETF) in the US.
Related: XRP price to $10–$50 ‘plausible’ if spot ETF approved, ChatGPT says
JP Morgan analysts predict that these funds may attract $4 billion-to-$8 billion in assets under management.
If the XRP price fails to hold above the flag’s upper trendline, it risks invalidating the bullish setup entirely. In such a scenario, the next downside target could be the pattern’s lower trendline near $1.90, a level that prevented XRP’s downside in December.
XRP/USD daily price chart. Source: TradingView
A break below $1.90 would shift the trend decisively bearish, opening the door to deeper declines, potentially toward the 200-day EMA (the blue wave) near $1.35.
Conclusion
In summary, XRP’s potential bearish divergence and its current position above critical moving averages signal a possible correction. Traders should closely monitor the $2.28 support level, as a failure to maintain this threshold could lead to a deeper bearish trend. Understanding these technical dynamics will be crucial for those navigating the volatile crypto landscape.
