Here’s why Chiliz’s [CHZ] bullish setup comes with THESE 3 warning signs

Chiliz [$CHZ] has rallied just over 6% in the past 24 hours. Coinalyze data showed that the Open Interest has surged by 24% in a day, showing high speculative belief in the current $CHZ rally.

Source: $CHZ/$USDT on TradingView

From a price action standpoint, Chiliz had a healthy outlook on the higher timeframes. The rally in January reached $0.064 and spent the next two months retracing these gains. Since March, the bearish tides have been stemmed.

The altcoin tested the 78.6% Fibonacci retracement level and has flipped it to a support level over the past month. The price has made a series of higher lows after sinking to the $0.03095 low on the 26th of February.

This was an encouraging sign for the Chiliz bulls. The recent price rally was not a sudden rush, but part of a longer-term upward push.

Yet, the volume indicators were worrisome. The A/D indicator has only made a slight uptick since March, showing demand has not been steady and overwhelming.

Meanwhile, the CMF indicator struggled to climb past the +0.05 threshold. A move beyond this value would be a convincing signal of higher timeframe demand and capital inflow to $CHZ.

In a recent report, AMBCrypto noted that $CHZ was ready for a 30% rally.

The reason was the formation of the inverted head and shoulders pattern. The price has pierced the $0.042 resistance zone since then, reinforcing its bullish chances.

$CHZ liquidation heatmap throws a spanner in the works

Source: CoinGlass

The 3-month Liquidation Heatmap showed a cluster of short liquidations around the $0.045-$0.048 area. This cluster was swept on Monday, the 20th of April.

Further north, a smaller liquidity pocket around $0.05 could pull $CHZ higher.

The sweep of the $0.045 shorts could be a problem for the bulls because it opens the possibility of a trend reversal for $CHZ. The sweep of the short liquidations could be followed by a bearish impulse move, especially if the Bitcoin [BTC] momentum falters later this week.

Traders’ call to action- Remain bullish

Source: $CHZ/$USDT on TradingView

The price action was reassuring. The H4 swing structure was bullish, and the retracement to $0.036, the 78.6% Fibonacci level, was followed by a rally to the 23.6% extension level at $0.047.

A drop below $0.044 would signal a potential retracement as deep as $0.038. Therefore, traders should be in no rush to buy just yet.

A sustained rally beyond $0.048 is possible, but the risk-to-reward ratio does not justify buying $CHZ right now, as a chunk of the move is over. Waiting for a retest of $0.038-$0.04 would be more ideal.

Final Summary

Chiliz has made slow but steady gains over the past month after falling to a key Fibonacci retracement support level.

It has a bullish swing structure across timeframes, and holders have an incentive to let the rally continue in the coming weeks.