Just a few days ago, our analysis of Chainlink pointed to a bullish setup, with expectations for continued upward momentum toward this year’s high. At that time, the outlook was clearly positive. However, within just three days, the situation reversed sharply.

The previously valid buy setup was invalidated, and a new seemingly bearish structure has since emerged—one that now points to a possible move down to 2023 lows. If realized, this would represent a 63% decline from current levels, offering a potentially compelling opportunity for short-side traders.

Although the earlier buy setup for LINK met bullish criteria, the price failed to hold above the key support zone. This brings us back to a core trading principle: "You must always be prepared for anything." Even thought-through setups can come with losses, and the elements of unpredictability and volatility must always be considered when managing trades.

While LINK’s price has dropped, the story doesn’t end there for traders. In fact, this movement has now established a fresh bearish setup, opening new opportunities for those aiming to capitalize on the downside.

Chainlink technical analysis

LINKUSD - 1 Day Time Frame

The new setup is based on two critical elements. First, the breakdown below the established support zone; and second, the formation of a new resistance zone, which reinforces the bearish outlook.

Yesterday, the price tested both levels and reacted exactly as expected in a bearish context—rejecting resistance and closing the daily candle with a small body and a long upper wick. This price action strengthens the conditions for entering short positions.

Chainlink price target

To manage trades effectively, a Stop Loss could be placed above the internal lower high, as shown on the attached chart. However, if the market unexpectedly reverses and the price closes back above the resistance zone on the daily timeframe, it may be prudent to reduce the position before the Stop Loss is fully triggered.

Looking ahead, LINK could potentially decline toward the 2023 low, which would represent a substantial move. Still, traders might consider taking partial profits at Sell-Side Liquidity levels to manage risk and secure potential gains as the price action unfolds.