Uniswap (UNI) market valuation could grow 100% in the second half of 2022, as it shows a classic bullish reversal pattern.
UNI bullish setup
Called an “inverse head and shoulders,” the technical pattern forms when price establishes three troughs in a row below a common support level (neckline), with the middle one (head) being deeper than the other two (shoulders).
Also, it resolves after the price breaks above the support level.
The UNI price trend since May 23 meets all the requirements to form an IH&S pattern, except for the right shoulder. A retest of its neckline near $5.71 would form the right shoulder, raising the possibility of an iH&S breakout scenario, as shown below.
As a rule of technical analysis, the price exiting an IH&S structure can go up as much as the maximum distance between the lowest point of its head and the neckline. Thus, the UNI IH&S upside target is around $9.78, which is more than 100% higher than the June 2 price.
Mixed Uniswap Price Signals
Uniswap’s longer timeframe charts draw attention to resistance levels that could prevent UNI from touching its IH&S pattern target.
This includes an interim resistance level around $6 that has rejected UNI price declines at least three times since May. A successful break above the $6 level could see UNI touch the February 2022 support around $7.52, the event of which preceded a 75% price rally to $12.48.
The $7.52 level also coincides with the UNI 20-week exponential moving average (20-week EMA – the green wave on the chart below), now near $7.90.
Conversely, a decisive pullback from the $6 resistance level will lead to an unfavorable technical set-up, referred to as a “bear flag.”
UNI has already turned lower after testing levels around $6, which coincides with the upper trend line of the flag. This leaves the UNI/USD pair with two possible scenarios: decline towards the lower flag trendline near $3.92, or bounce for a possible break above the upper trendline.
UNI’s move towards $3.92 could trigger the bear flag breakout scenario, which would mean a drop of more than 45% to $2.75 from the price on June 2. On the other hand, a break above the upper trend line would invalidate the bear flag setup entirely.
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