SEI Experiences Prolonged Downtrend but Now Testing a Key Demand Zone

SEI has been in a steady downtrend since reaching its peak near $0.73, forming a clear descending channel.

SEI has experienced a prolonged downtrend, testing a key demand zone that could be the final point of defense. If breached, SEI could continue to fall, aiming for the next significant support at $0.1. However, if buyers manage to defend this zone and spark a rebound, SEI has the potential to rise towards $0.4, offering a 100% return from current levels.

On the other hand, if SEI fails to break above the $0.20-$0.22 range, it could signal another leg down, with the next support level at $0.15.

SEI Is Now Testing A Key Demand Zone

SEI has been on a tear since the beginning of the year, hitting a high of $0.73 in January. However, the token has since lost more than 70% of its value, falling to a low of around $0.18 in March.

The token has been trading in a clear descending channel on the 4-hour chart for the past few months. This channel has provided strong resistance for any rallies, while the lower channel support has provided support for any declines.

The recent correction has also formed an extended W-X-Y-Z pattern, which is a common pattern that signals a change in trend. The wave Z low of this pattern coincides with the lower channel support at around $0.18. This region is also a key horizontal demand zone, which could provide strong support for any further declines.

The Fibonacci retracement levels from the recent low of $0.18 and the high of $0.32 could provide some resistance for any rallies. The 0.786 Fibonacci retracement level is at around $0.32, which is the likely ceiling for any relief rally.

Moreover, the RSI has become oversold, which indicates that selling pressure is waning. A bullish divergence could also form on the RSI, which would signal that the downtrend is weakening.

A breakout from the descending trendline, which has been dictating price action for the past few months, would be needed to confirm a reversal in the trend.

If SEI manages to close above the $0.20-$0.22 range, it could signal the start of a new recovery wave, which has the potential to target the 0.382 or 0.5 retracement levels at $0.40 or $0.46, respectively.

If SEI is rejected at this range, it could continue to fall, testing the $0.15 level or lower, which would invalidate the reversal scenario.

SEI Could Be Setting Up For A Short-Term Rally

In the 1-hour timeframe, SEI is still showing signs of recovery, with the structure hinting at the early stages of an impulsive recovery.

The formation of waves (i) and (ii) indicates a possible five-wave structure in progress as SEI attempts to break free from the prolonged downtrend.

If wave (iii) extends properly, setting a new rally towards the 0.382 Fibonacci retracement level at $0.22, it could open the door for another leg up.

A breakout from the descending triangle would provide confirmation, sending the price towards the $0.24-$0.25 region, offering a final point of rejection for sellers. However, failure to break above this level would invalidate the impulse count and suggest further consolidation or even a return to the lower support.

Key support remains at $0.175, aligning with the lows of wave (ii) and offering a buffer for buyers. If SEI breaks below this level, the bullish outlook will be invalidated, leading to further declines towards $0.15.

In the bullish case, if the structure holds and completes the five-wave impulse, a corrective wave (iv) retracement around $0.21-$0.22 could offer a safe place to reenter before another push higher into the $0.24-$0.26 region.