Heliums HNT surges 10% but faces 35% pullback risk

Helium's native token, HNT, has experienced a notable 10% surge in the past 24 hours, leading the broader cryptocurrency market during this period. However, this rally may be short-lived as several indicators suggest mounting selling pressure and weakening momentum.

According to an analysis, while HNT appears bullish on the surface, underlying market structure and liquidity issues indicate a likely pullback. The token is approaching a critical supply zone between $3.90 and $4.24, an area that has historically triggered significant sell-offs. Previous interactions with this zone resulted in declines of 42%, 17%, and 46% on different occasions. This pattern suggests that another move into this supply zone could trigger a sharp drop, potentially ranging between 17% and 46%, with an average decline around 35%.

Investors seem to be anticipating this correction, with spot market participants selling approximately $2.17 million worth of HNT over the past four days. This selling trend is reflected in consistent outflows and a derivatives market that favors sellers. Open Interest has climbed 4% to $7.34 million, but the Long-to-Short ratio indicates that most of the added liquidity came from short positions. Additionally, trading volume has declined 10% even as the price rose, a red flag for bullish momentum.

Technical indicators further support the bearish case. The Money Flow Index (MFI) has entered overbought territory, suggesting that HNT is currently overvalued and vulnerable to a correction. The Accumulation/Distribution (A/D) indicator remains in negative territory, pointing to more selling than buying activity and hinting at sustained downward pressure. If the A/D indicator continues to stay negative, HNT could face a significant drop in the coming days.