Aave (AAVE) price has more than doubled in a month, but its bullish momentum might be reaching a point of exhaustion.
AAVE Price Tests a Key Turning Level
Notably, AAVE is up over 103% after bottoming out locally at $45.60 on June 18, reaching almost $95.50 on July 15. Nevertheless, the token’s strong pullback move has brought its price closer to the level that triggered similarly strong pullbacks since early June.
In other words, AAVE has been testing rising trendline resistance which constitutes a “bear flag”, a bearish continuation pattern. For example, the previous test of the trend line on July 9 ended with a 20% move down. Similarly, a similar attempt on June 24 saw the price of AAVE drop by nearly 30%.
As a result of this behavior of the distribution, AAVE’s current attempt to break above the flag trendline could be met with extreme selling pressure. A pullback could see the AAVE/USD pair retest the lower flag trend line near $67.75 as a downside target for September, which would be almost 30% down from current price .
Meanwhile, the $76.30 level serves as interim support, mainly due to its history as a price floor in May that preceded a 60% rebound move.
Bearish Flag Breakout Scenario
As a rule of thumb of technical analysis, the break below $67.75 could cause AAVE to plunge to the height of the “flagpole” that formed before the bear flag. That would make the token look at $35.50 as the bear flag profit target, which would be over 60% down from the current price.
On the contrary, a continued bounce move above the upper trend line of the bear flag would invalidate the breakout setup. In this case, the upside target for AAVE will likely be the $115-$120 range that served as resistance in June.
GHO stablecoin
More than half of the gains during Aave’s price rally have come from its proposal to launch a US dollar-pegged stablecoin called GHO.
1/ Calling all GHOsts
We have created an ARC for a new decentralized, collateral-backed stablecoin, native to the Aave ecosystem, known as GHO.
Read more below and discuss your thoughts for the snapshot (coming soon)!https://t.co/P7tHl9LbBe
— Aave (@AaveAave) July 7, 2022
1/ Call all ghosts
We have created an ARC for a new collateral-backed decentralized stablecoin native to the Aave ecosystem, known as GHO.
Read more below and comment your ideas for the snapshot (coming soon)!
On July 7, Aave Companies, a centralized entity that supports the Aave lending protocol, asked its community to vote for its “overcollateralized” stablecoin proposal. The price of AAVE soared more than 53% afterward, led by speculation that GHO would drive DeFi token adoption.
However, any further rises could push AAVE into “overbought” territory, with its daily RSI just five points below 70 as of July 15.
Breaking above the 70 threshold could push AAVE price into a correction phase, likely triggering the bear flag scenario as discussed above.
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