Trading Analysis of Aave Usdt pair on daily frame.

TA #6: Analyzing AAVE | Falling Wedge | Lower Highs & Lower Lows (10/03/2022)

By CryptoManthan | Coin Analysis | 10 Mar 2022


A leading DeFi platform in the crypto space AAVE doesn't need any type of introduction. It is a bag of innovation and a road to decentralized finance. Basically, AAVe is an open-source platform that facilitates users to earn interest over their crypto holdings or borrow from the market, and most important to note that all of its services are non-custodial, which means your assets are in your control. Along with lending and borrowing, AAVE provides an innovative product uncollateralized loans, called flash loans. Developers can utilize these types of loans and we might need a special article over it to understand. AAVE also has its own token over the Ethereum network which users can utilize for payments or some sort of discounts.

In this article, we will look into the daily chart of the AAVE and see the emerging patterns as well as the indicators. Before starting please take a second to read the following note:

Note: The purpose of this Technical Analysis is to show the use of indicators and understand their meanings. So before making any financial decisions do your own research. Now sit back and enjoy the analysis!!

Support & Resistance

The longer time you spend in crypto or any type of financial analysis you give greater the importance to support and resistance levels in your analysis. Because no matter what market you are in, whether it is crypto, forex or stocks there is always a zone of bulls and bears where it is almost sure that they will act. So as always we will start our analysis by withdrawing some support and resistance zones. 

Check out the daily chart of AAVE/USDT pair with support and resistances:

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Current Support Zones

Primary Support Zones: $97 - $105

For now, the nearest support zone is at around $100 which has formed already in the early January of 2021 bull market. It can be clearly seen that the price is approaching the support zone with the formation of Lower Highs and Lower Lows which suggests the downtrend.

Current Resistance Zones

Primary Resistance Zone: $147 - $152

Secondary Resistance Zone: $195 - $205

Recently, a primary resistance zone has been tested in the last week, and the price got rejected from that level, this resistance zone looks stronger so in order to have a trend reversal the flipping of this primary resistance is a must, and for that, the strength of bulls will be tested for sure. The next secondary resistance zone is at ~$200.

Falling Wedge 

Currently, the emerged pattern on the daily chart is the Falling Wedge. Price is respecting the pattern and moving accordingly. Also, we already saw that there is the formation of Lower High and Lower Low, which indicates the downtrend. You can check the chart below and see the Falling Wedge.

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In order to see a massive & confirmative uptrend price has to show a breakout from this Falling Wedge as well as from the primary support of level of $150. If bulls manage to take the price from these barriers then there is a long upward potential to the $200, the next secondary resistance zone.

What Are Indications From Indicators?

We have seen the support and resistance zones, Lower High Lower Low pattern, and the Falling Wedge pattern. Now it's time to look into the trading indicators and see their indications and derive conclusions from them.

Smooth Moving Average (SMA 200)

SMA 200 gives us a long-term idea of an asset's trend. And as you can see in the chart above the price is trading below the SMA 200 line which indicates the AAVE is in a downtrend. Along with the Falling Wedge and primary resistance zone, the price has to flip the SMA 200 line in order to get into an uptrend. For now, SMA 200 is acting as a resistance and it has to be converted in support of the uptrend.

MACD & RSI (Moving Average Convergence Divergence & Relative Strength Index)

As you can see in the chart below that the MACD line and Signal line are close to each other and moving along. Recently there is a crossover between the MACD line and the Signal line which shows the momentum is bullish but the strength of momentum is not that strong. Also, the MACD histograms are turning bullish but are almost negligible in the size.

Relative Strength Index (RSI) closed at ~42 and at the moment of writing this article it is around ~38. As the RSI is below 45, which indicates the bearish side, and is above 30, which indicates that the price is not oversold.

On Balance Volume (OBV)

Volume plays an important role in the trading analysis and On-Balance-Volume gives us more detail about volume. It shows the difference between the volume on up days and down days, by which we can conclude whether bears are dominating the volume or bulls. At the time of writing, this article OBV line is hovering with the downward slope which shows the volume on down days is larger than that of up days, a sign that bears are dominating the trading volume right now and indicates a downtrend.

Here you can see the entire trading set up of AAVE/USDT pair on the daily timeframe:

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Conclusion

Now after looking at every possible aspect of our trading set up including support & resistance zones, Falling Wedge pattern, Lower Highs Lower Low formations, and then the basic indicators. By considering all of these aspects and the current market scenario we can say that the AAVE is in a downtrend. Make sure the price is in the Falling Wedge and test its upper roof, a breakout from there can show a sort of bullish momentum but at this momentum, the most likely move will be a rejection from there or a breakout and retest scenario. 


Hope you like this analysis and this article. Do share your feedback about this analysis and share your opinion on AAVE project. Thanks for your time and appreciation! 

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CryptoManthan
CryptoManthan

We write about trading indicators, strategies, crypto projects, and blockchain technology.


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