Chainlink faces key support test as selling pressure increases

Chainlink (CRYPTO:LINK) has seen a 19% rise since hitting a ten-month low on August 5, forming an ascending channel pattern. 

However, recent declines have brought LINK's price closer to a critical support level, raising concerns about a potential reversal to its previous low if support fails. 

LINK has dropped 5% since Monday due to increased selloffs, bringing it to the lower boundary of its ascending channel. 

This pattern, characterised by upward-sloping parallel lines, shows resistance around $12.70 and support near $10.98. 

A break below the lower line would signal a failure by the bulls to defend the support, likely leading to further downward momentum. 

At press time, the Chaikin Money Flow (CMF) indicator for LINK is approaching its center line, indicating reduced demand. 

When the CMF approaches or dips below zero, it suggests that selling pressure is stronger than buying pressure, signaling a bearish outlook for the token. 

Additionally, LINK’s On-Balance-Volume (OBV) has declined by 1% to 885 million, reflecting a similar trend of increased selling pressure. 

The weakening demand for LINK is further evidenced by a negative price-daily active address (DAA) divergence, an on-chain metric comparing price movements with the number of active addresses. 

This divergence suggests that the current price movement is not supported by network activity, reinforcing the bearish sentiment. 

If the support at the lower boundary fails, LINK could target a lower price of $8.08. 

Conversely, a renewed demand could reverse the trend, potentially pushing the token's price up to $12.33. 

However, current signals, including declining CMF and OBV, point towards a continued downtrend, making it a critical period for LINK as it tests its support level. 

At the time of reporting, the Chainlink price was $11.22.