Kite [KITE] has been on the upside, with the token delivering a 14% surge at the time of writing. The gain appears to be strengthening, especially when viewed through the lens of the chart, where it has printed a bullish precursor pattern.
Capital flow, however, could remain a key constraint to price performance in the near term, as spot traders enter profit-taking territory in the market.
Kite crypto forms a bullish pattern
The price is forming a clear bullish head-and-shoulders pattern, which could precede a breakout and push the price higher.
At the time of writing, KITE was trading around the second shoulder while testing the neckline, marked by the horizontal line. This could be the key test for whether the rally occurs or the pattern fails.
Currently, the asset is testing the neckline of the pattern. A break above this level could see price make a short-term rally of about 21%, surging toward the $0.164 level. If the momentum remains strong, KITE could then reach $0.198.
On the other hand, if it continues to consolidate around this level or forms a lower low relative to the recent bullish candle, it would invalidate the pattern, leaving KITE moving within the range or potentially heading lower.
Indicators show a strengthened outlook
Analysis of the indicators in the market shows a strengthened outlook for price, with the Money Flow Index (MFI), which tracks the inflow and outflow of capital into an asset, playing a key role.
According to the analysis, the MFI has continued to surge, remaining at a relatively high level of 79.65, implying that capital inflows are present. However, the inflows have remained flat without pushing further upward on the chart.
Typically, a move beyond the 80 mark would suggest that KITE has become overbought and may have exceeded its fair value.
Likewise, the Average Directional Index (ADX), which tracks the strength of a market trend, showed that the current direction of price remains on the stronger side.
To put this into perspective, a rising ADX alongside a climbing price shows that the asset is gaining momentum, which could support further upside in the near term.
Will spot limit the surge?
While KITE maintains a structurally bullish outlook, there are concerns over spot trader activity in the market.
At press time, spot market netflow has been positive. A positive netflow stems from more capital flowing into exchanges than leaving them, suggesting that investors are potentially positioning for selling, which could weigh on price.
This has been a trend that has lasted for more than three days, with cumulative netflow within that period reaching $291,000. The same trend has also been observed over the past 24 hours, which could dampen the outlook for price.
Final Summary
- KITE is testing the neckline of a bullish head-and-shoulders pattern, with a breakout potentially opening the path toward $0.164.
- Positive spot netflow could limit the rally as traders appear to be positioning for profit-taking, despite strong momentum indicators.