The MERL token has indeed sparked a critical debate, and a convergence of technical indicators and on-chain factors currently suggests the move has more characteristics of a bull trap than a sustainable breakout.
A Surge Lacking Conviction
The MERL token experienced a dramatic price increase, with a surge of over 133% on November 27th, pushing its price to a high near $0.497. However, this rally lost momentum quickly. The price faced strong rejection at the key weekly resistance of $0.45 and failed to achieve a decisive close above this critical level. This failure to hold higher ground was a primary red flag. The upward move was further undermined by low buying volume and a breakdown from an ascending support trend line on the hourly chart, confirming short-term fragility and triggering a price crash. As of November 27-28, the token is trading around $0.283, reflecting a significant retreat from its recent peak.
Technical Indicators Flash Warning Signs
Beneath the surface of the price pump, several momentum indicators displayed classic signs of weakness that contradicted the bullish price action.
-
Bearish Divergences: During its climb throughout late October and November, the Merlin Chain price formed a higher high. However, the Relative Strength Index (RSI), which measures the speed and magnitude of price movements, produced a lower high. This bearish divergence often signals that upward momentum is waning and can precede a trend reversal.
-
Lack of “Smart Money” Support: The Chaikin Money Flow (CMF), an indicator that tracks the flow of money in and out of an asset, also formed lower highs while the price was rising. It eventually dropped below the zero line, indicating that large-scale investors were not supporting the rally and that selling pressure was dominant.
The Overhanging Risk of Supply Concentration
Compounding these technical worries is a significant fundamental risk: a highly concentrated token supply. Reports indicate that a single wallet holds nearly 50% of the entire MERL supply. This creates a systemic risk for the token, as any decision by this large holder to sell could unleash a massive amount of supply onto the market. Such a move would likely overwhelm buy-side liquidity, leading to an abrupt and severe price drop. This concentration of tokens makes MERL particularly vulnerable to volatile swings and adds credence to the bull trap theory.
Key Levels to Watch for Confirmation
For traders and treasury managers, the current setup demands caution. The market is at a crossroads, and future price action at key levels will provide the clearest signal of its next direction.
-
For a Bullish Reversal: To invalidate the current bearish outlook and signal a potential sustainable uptrend, MERL would need to achieve a strong weekly close above the $0.38 to $0.45 resistance zone with a significant increase in trading volume. Such a move would suggest real conviction from buyers.
-
For a Bearish Confirmation: Conversely, if the price fails to reclaim these levels and breaks below the crucial support at $0.28, the reversal setup would grow stronger. A daily close below the next major support at $0.21 would likely confirm a broader downtrend is underway.
In summary, while the recent surge in MERL’s price was notable, the preponderance of evidence—including failed resistance tests, bearish momentum divergences, and a dangerously concentrated supply—points towards a bull trap. Investors should wait for a clear and sustained breakout above key resistance levels before considering a bullish position.
