AVAX Technical Analysis Feb 4

AVAX is trading under downtrend pressure at the $10.10 level; with RSI at 30.94 approaching the oversold region, the main supports at $9.16 and $9.93 levels play a critical role. Investors should implement capital protection-focused stop loss strategies against altcoin volatility due to BTC correlation.

Market Volatility and Risk Environment

AVAX, at its current price of $10.10, shows limited volatility with a 24-hour drop of % -0.39 and a daily range of $9.54 – $10.34. Volume remains at a moderate level of $335.25M, while the overall trend continues as downtrend. The RSI value of 30.94 indicates proximity to the oversold region (below 30), suggesting short-term recovery potential, but its sustainability is questionable; as Supertrend gives a bearish signal and the price is trading below EMA20 ($11.43). In multi-timeframe (MTF) analysis, a total of 9 strong levels have been identified across 1D/3D/1W timeframes: 2 supports/2 resistances on 1D, 1S/1R on 3D, 2S/3R distribution on 1W, balanced but with bearish bias prevailing. In terms of volatility, the daily range covers 8% of the price, which is medium risk for the crypto market; sudden BTC movements can cause 10-20% deviations in altcoins. Although the introduction of the Avalanche Policy Coalition Advisory Council provides positive fundamental support in the news flow, the technical downtrend limits this effect. Investors should measure volatility based on ATR (Average True Range) –which can be estimated at around $0.80 daily according to current data– and adjust their positions accordingly; wider stops in high volatility periods prevent capital erosion.

Risk/Reward Ratio Assessment

Potential Reward: Target Levels

In a bullish scenario, the $13.9847 target (score:27) offers 38.4% upside potential from the current price; this level could become accessible if resistances at $10.4675 (72) and $11.5910 (60) are broken. However, in a downtrend, the probability of reaching this target is low; MTF resistance weight (especially 3R on 1W) may limit the rally. In terms of risk/reward, the entry point is critical for an ideal 1:2+ ratio –for example, reaching $13.98 from $10.10 should be balanced with a stop loss.

Potential Risk: Stop Levels

The bearish target of $6.0701 (score:22) carries 40% downside risk from the current price; this could be triggered if main supports at $9.1600 (75) and $9.9350 (64) are broken. Short-term risk is high due to the price’s proximity to the $9.54 daily low; a breakdown below $9.16 as invalidation level could quickly turn positions negative. The risk/reward ratio in the current setup is approximately 1:0.96 (downside 40% vs upside 38%), unbalanced; this creates a risky environment for long positions and requires capital protection priority.

Stop Loss Placement Strategies

Stop loss placement should be based on technical structure: A tight stop with 1-2% buffer below the main support at $9.1600 (high score 75/100), e.g., $9.00, is ideal, as this level is strong in MTF. For volatility-based strategy, use ATR multiplier –1.5x ATR (~$1.20) stop distance prevents whipsaws. Structural invalidation: Price remaining below EMA20 ($11.43) confirms bearish continuation; for longs, stop below $9.9350, for shorts, trailing stop above $10.4675 is recommended. Educationally, trailing stops (e.g., Supertrend following) provide dynamic adjustment while protecting gains; fixed stops carry early trigger risk in volatile markets. For altcoins like AVAX, synchronize stops with BTC supports ($75,745) due to BTC correlation –simultaneous breakdowns create double risk. Strategy: Calculate stop distance to fix risk at 1% and size accordingly; this prevents 20% capital erosion in consecutive losses.

Position Sizing Considerations

Position sizing is the cornerstone of capital protection; rule: Allocate 1-2% of account balance to single trade risk. For example, in a $100,000 account, maximum $1,000-2,000 risk –if stop distance is $1, then 1,000-2,000 AVAX position. Formulas like Kelly Criterion (win rate x avg win / avg loss) optimize, but conservative 0.5% usage balances volatility. Reduce size when volatility increases (ATR >10%); in AVAX downtrend, prefer fractional sizing (0.5%). Diversification: Keep total risk at 5%, 2% limit between correlated assets (BTC/AVAX). Educational concept: R-multiple system –measure every trade in R (R=stop distance), target 3R+ profit; this ensures profitability even at 40% win rate. Never risk full capital; backtests show that 1% risk rule keeps drawdowns at 20%.

Risk Management Outcomes

In AVAX, risk is forefront: Downtrend, low R/R ratio, and BTC bearishness are pressuring altcoins. Key takeaways: Quick exit on support breakdowns, dynamic stops according to volatility, and apply 1% risk rule. Despite positive news, technical weakness prevails; be patient for capital protection, avoid FOMO. Monitor long-term MTF levels –9 strong levels offer opportunities, but bearish Supertrend gives caution signal. Overall: In crypto volatility, 50%+ drawdowns are normal; survive with disciplined risk management.

Bitcoin Correlation

AVAX shows high correlation with BTC (~0.85); BTC at $76,429 level with % -2.89 drop and downtrend, Supertrend giving bearish signal. If BTC supports at $75,745, $72,946 break, additional pressure may come to AVAX at $9.16; if resistances at $77,857, $82,178 are surpassed, altcoin rally could be triggered. BTC Dominance rise crushes alts; to watch: BTC breakdown below 75k strengthens AVAX shorts. Strategy: Use BTC movements as lead indicator, adjust AVAX stops according to BTC levels.