Everything AAVE buyers should know before initiating a long position

AAVE’s recent southbound movement came to a halt after buyers applied enough pressure to cause a patterned breakout over the last few days. Long-term, the bears have resisted giving up their advantage, especially with the price hovering below the 200 EMA (green).

The current breakout rally may help buyers by eliciting a string of green candles. AAVE was trading at $82.21957 at the time of publication, up 3.3% in the previous 24 hours.


AAVE saw a falling wedge breakout, can the bulls sustain their edge?

Source: TradingView, AAVE/USD

Soon after reversing from the $115 resistance in mid-August, AAVE fell back into its bearish track below the 20 EMA (red) and the 50 EMA (cyan) in the daily timeframe.

The resultant rally entailed a classic falling wedge setup on its charts. The crypto entered a low volatility phase as it squeeze near the apex of the falling wedge.

A bullish hammer candlestick marked the buyers’ intention to induce a rally. Furthermore, the bullish engulfing candlestick fueled this buying rebuttal and aided AAVE in breaking above the 20/50 EMA.  

Any rebound from the immediate support could expose AAVE to an extended upside in the coming sessions. In this case, the potential targets would rest in the $92 region. But the buyers should wait for potential bullish crossovers on the 20/50 EMA before opening a long position.

Also, the On-Balance-Volume (OBV) was yet to topple its immediate resistance. To top it up, its recent peaks bearishly diverged with the price action. A plausible close above these resistances can pave a path for a solid recovery. 

An increase in development activity and Open Interest

Source: Santiment

Interestingly, the price action highly correlated with the development activity for over six months. However, since late July, the price action diverged with AAVE’s development activity. With the activity expediting solidly, the price was yet to follow.

Source: Coinglass

Moreover, an analysis of AAVE’s Futures Open Interest revealed a rather bullish sign. It saw an over 38% jump over the past day while the price increased by nearly 3.3%. However, an unusually high Open Interest could also hint at a potential reversal.

Finally, AAVE shared a 46% 30-day correlation with Bitcoin. Hence, keeping a close watch on the king coin’s movement would be vital in making a profitable bet.

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