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Although Zcash has continued to soar above $1,200, two technical indicators point to a growing likelihood of a significant correction. ZEC is still structurally bullish, but after its most recent increase, the extreme divergence from its moving averages and waning momentum merit consideration.
Zcash is back above key levels
After hitting about $1,250, ZEC is currently trading at about $1,124. Only a few sessions ago, the asset was trading close to $800; at its highest point, the most recent leg alone produced gains of about 50%. RSI is the first to issue a warning. The price of ZEC has reached a significantly higher peak, rising from the August peak of about $880 to more than $1,200.
However, RSI has not been able to generate a correspondingly higher high. Despite the significantly higher ZEC price, the indicator peaked at a higher level during the August rally and is currently around 74. As a result, there is a bearish RSI divergence as the price keeps hitting new highs while the underlying momentum wanes.
After near-vertical advances, these divergences become more significant, but they do not always put an end to rallies. ZEC's drastic departure from its moving averages is the second signal. Even after the most recent decline, ZEC is still about 33 percent above its closest significant dynamic support, as the 20-day moving average is currently close to $847. While the longer averages stay close to $614 and $512, the 50-day average is about $650.
Substantial gap around ZEC
This indicates that there is a sizable technical gap below the current price as a result of the rally. ZEC does not have to immediately return to those averages, but if profit-taking picks up speed, the lack of nearby established support raises the possibility of a decline. The first crucial area to keep an eye on is roughly $1,040–$1,080, which corresponds to the most recent breakout region.
Holding it might enable ZEC to stabilize before making another attempt at $1,200–$1,250. In a breakdown, the $950 region would be significant, followed by the $800–$850 previous consolidation zone. The latter is also in close proximity to the quickly rising 20-day moving average.
As a result, Zcash is still in a strong uptrend, but the nature of the rally has evolved. Demand must now be more aggressive in order to sustain momentum as a bearish RSI divergence appears and the price is remarkably extended above its trend averages.