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The Optimism (OP) price has risen significantly over the past 11 days, while bouncing off the diagonal resistance line
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Optimism (OP) jumped 50%: a relief rally or a long-term reversal
The rally may continue in the short term, but longer-term indicators suggest it’s just a relief rally.. The long-term outlook for Optimism is still considered bearish.
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Optimism is recovering from a massive drop
Optimism is a popular open Level 2(L2) scaling solution for the Ethereum blockchain. It is designed to solve the ETH scalability problems that cause users of the network to pay high fees and wait a long time to process transactions.
According to technical analysis, the token price has been declining since late April along a downward resistance line. Due to the fall on June 10, the bottom was formed at $0.89, which was a new yearly low. However, the price recovered after that, jumping 51%.
The price of Optimism made a bullish break-down of the descending resistance line, which has been on the chart since April 15.. This is a strong indication that the previous correction may have ended.
It is a strong indication that the previous correction may have ended.
Source: TradingView
In addition, the daily RSI index confirms the continuing rise. The indicator pushed away from the downward resistance line and has just risen above 50. Accordingly, it confirms a bullish breakout and uptrend formation, at least on the daily timeframe.
Long-term outlook for OP remains bearish
The price dynamic on the daily timeframe gives hope for a relief rally, but wave analysis shows that the long-term trend remains bearish.
The main reason is that the rise between June 2022 and February 2023 is a three-wave structure. As a result, it will most likely be an A-B-C correction. Since the correction is pointing upwards, it is likely that the trend is bearish.
If this is indeed the case, then Optimism is in the fourth sub-wave (red) of wave three (white). So, after the completion of the current rebound, the price will fall again, falling to a new annual low. The first target and the potential bottom for such movement is located around $0.30.
Source: TradingView
Despite this bearish outlook, a rise in price above the first sub-wave low (red line) of $2.02 would mean that the trend is bullish. In that case, OP could rise to $3.
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