The Aave price has been responding perfectly to technicals lately. That may be a bad thing for bulls as an important indicator is now flashing red.
Aave is last trading at $272.50, down $4.52 (-1.68%).
Decentralized finance (DeFi) token Aave has been on a great run. Over the last seven days, the price has gained 30% and is trading just short of my price prediction, published on the 23rd of June:
“The daily chart clearly shows the significance of the trendline at $206.00. If the Aave price can remain above this trend in today’s session, it would validate the price reversal. Moreover, bulls may then target the horizontal resistance of $277.00.“
The impressive price action came as Aave recovered from steep losses it suffered on the 22nd of last month: Again, the market gave plenty of warning. On the 13th, I wrote:
If Aave closes below $276.60 today, a return to the May $206.81 low looks probable.
Now, this is not to massage my ego. It’s to highlight that the Aave price is responding extremely well to technicals indicators.
Unfortunately, a significant moving average indicator is signalling the price may be about to turn lower.
Aave ‘Death Cross’
A death cross is when the 50-day moving average trade below the 200 DMA. As of yesterday, the 50 DMA at $301.00 is beneath the 200, at $302.91. This is considered extremely bearish and indicates that price momentum has turned from a long-term uptrend and is now accelerating south.
Of course, it doesn’t take a genius to come to that conclusion. However, with the price having just achieved the upside target, this occurrence could encourage some profit-taking from longs who rode the rally higher.
If the Aave price fails to close above $277.00 in today’s session, the recent rally may be reversed. On that basis, I would expect the price to retreat to the long term uptrend at $220.00. Furthermore, the bias will likely remain negative until the price recovers territory above the 200 DMA.
Should that happen, the bearish view becomes invalid and points to an improving technical outlook.
Don’t miss a beat! Follow us on Telegram and Twitter.
Aave price chart (daily)
Follow Elliott on Twitter.