The prospects for that Ren (REN) continue its current bounce to new highs seem slim as a classic bearish reversal pattern begins to emerge.
Nicknamed head and shoulders, the setup appears when price forms three peaks, with the middle peak (called the head) longer than the other two peaks described as the left and right shoulders. The bottoms of these peaks are supported by a neckline.
The pattern comes into play primarily when the price breaks below the neckline in a correction that follows the formation of the right shoulder. That prompts traders to open short entries below the neckline, ideally targeting a length equal to the distance between the high point of the head and the neckline.
What’s behind the current REN configuration?
REN has been forming what appears to be an upturned head and shoulders pattern, supported by a rising neckline.
In detail, the REN price rose and fell to a low in mid-December 2021, forming the left shoulder. Later, it bounced sharply to create a higher peak, above the highest level of the first shoulder, and then fell again.
Since then, REN has recovered again and you are now in the process of shaping your right shoulder, as shown in the chart below.
As a result, REN price may continue to bounce until it completes its right shoulder formation, which could be near the 50-day exponential moving average; the velvet wave, near $ 0.67. That’s due to the recent wave history of limiting REN’s price bounces.
Additional selling pressure could also come from the 0.618 Fib line near $ 0.633 due to its historical relevance as a support and resistance. Overall, a pullback seems likely to occur that would cause REN to do the right shoulder. Meanwhile, a correction towards the neckline, followed by a break below, would confirm the head and shoulder configuration.
By doing so, the move may shift the REN target down to $ 0.30, measured after adding the distance between head and neck height to the breakout point. That’s about 50% below the current trading price at $ 0.59.
The long-term outlook remains optimistic
REN’s head and shoulders setup is part of a broader price correction that has seen the token lose nearly 70% of its value from an all-time high near $ 1.92 in February 2021.
On a longer time frame chart, REN appears to have consolidated only within a giant symmetrical triangle, suggesting that its correction towards $ 0.30 may end up causing a bounce towards $ 1.20.
Bullish signals for REN may also come from the growth of its eponymous sponsor. Ren’s flagship product, RenVM, brings interoperability to the decentralized finance (DeFi) ecosystem. It maintains users’ digital assets as they move between blockchains using zero-knowledge proof over a sMPC-based protocol.
REN acts as a link to execute the calls Darknodes that feed RenVM’s sMPC network. Those who deposit 100,000 REN can run these Darknodes and as a result can earn rewards in Bitcoin (BTC), Ether (ETH), Zcash (ZEC), and other tokens.
The total locked value (TVL) of digital assets minted across all chains, including Ethereum, Binance Smart Chain, Solana, Polygon, Fantom, Avalanche, and Arbitrum, by RenVM was found to be $ 1.05 billion at the time of writing by comparison. with USD 6.6 million in June 2021.
Meanwhile, the total amount of transactions through RenVM across all chains reached an all-time high of $ 8.89 billion on January 4, 2022. That shows a steady increase in adoption of the Ren network, driving bullish prospects. of the REN token.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and business move involves risk, you should do your own research when making a decision.
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