Shiba Inu (SHIB) may see a pullback by nigh 25%–35% on fears that the cryptocurrency's excessive price rally in October has left it overvalued, a central indicator shows.

Dubbed the Relative Strength Index (RSI), the indicator measures the magnitude of an instrument's recent price changes to evaluate its oversold and overbought conditions. The effect can be anywhere between the number 0 and 100, with a reading beneath thirty showing the instrument's oversold and above 70 showing its overbought status.

SHIB crossed above lxx on Oct. three and peaked around 94 three days later on. Ideally, its overbought reading could have resulted in a cost correction. Only SHIB continued its rally every bit the monthly session progressed, eventually rising over 574% to its five-month high at $0.00004860 on Oct. 26.

Surly divergence

On the other hand, Shiba Inu'south RSI slipped lower, thus creating a broad departure between SHIB'southward toll and momentum. That reflected an underlying weakness in the cryptocurrency's ongoing uptrend, raising possibilities of a pullback in the coming days.

SHIB/USDT daily cost chart featuring departure between the rising cost and falling RSI. Source: TradingView

Additionally, the terminal three price candles on the Shiba Inu daily chart formed a sequence of higher highs at their close. But that coincided with declining trading volumes three days in a row, thus further validating the SHIB uptrend's underlying weakness.

That does not mean an immediate price correction. Co-ordinate to the breakout that followed the formation of a Bull Pennant indicator, SHIB bulls appeared to have been eyeing $0.00005222 every bit their next upside target.

25%–35% SHIB toll pullback?

A Fibonacci Retracement graph between the Shiba Inu's swing loftier of $0.00003466 and the swing depression of $0.00000621 presented a string of levels that earlier served as support and resistance.

For instance, the i.618 Fib line of the graph nigh coincided with the Shiba Inu'due south Bull Pennant target, merely a 2-notch upward at $0.00005224.

Thus, the resistance confluence of the 1.618 Fib line and Bull Pennant target raised SHIB's potential to examination the $0.00005222–$0.00005224 price range before undergoing a potent price correction.

SHIB/USDT daily price nautical chart featuring Fibonacci retracement levels. Source: TradingView

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In doing so, the cryptocurrency'due south next downside target is near the 1.0 Fib line of $0.00003466, almost 25%–35% beneath the current price and $0.00005224.

On the other mitt, a intermission to a higher place the 1.0 Fib line risks temporarily invalidating the entire bearish setup. That said, a bullish motility may all the same make SHIB excessively overvalued based on its RSI readings, raising the potential of a correction in future sessions.

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