According to a technical indicator, a sharp rebound in the price of this DeFi altcoin project over the past three days is showing signs of going higher in May.
This DeFi altcoin price has rebounded from key support
The so-called “up wedge” pattern occurs when the price rises in a range defined by two ascending, contracting trendlines. Typically, it resolves after the price breaks below the lower trendline with convincingly rising volumes. DeFi altcoin AAVE has been charting a similar ascending channel since early February 2022. The AAVE/USD pair has bounced back in the past few days after testing the lower trendline of the wedge as support. This means that the bulls are currently holding the upper trendline of the formation near $280, an increase of about 40 percent from the price of April 20.
The upside target also coincides with the level that served as resistance between November 2021 and January 2022. It was also instrumental in limiting the downside attempts of Defi Altcoin AAVE during the July-October 2021 period.
“bull trap” levels to watch
As we have previously reported on Cryptokoin.com, rising wedges are considered bearish reversal patterns by many traditional analysts. It shows that AAVE’s run up to $280 may not turn out to be a full-blown bull run. Instead, the Defi altcoin project seems less likely to correct. Moreover, the price of AAVE may experience an early pullback after reaching its 200-day exponential moving average (200-day EMA; blue wave on the chart above) around $208, indicating an imminent deterioration.
As a rule, an ascending wedge break causes the price to drop to a measured target after adding the distance between the upper and lower trendline of the patterns to the breakout point. Therefore, based on the level at which AAVE has broken out of its ascending wedges, the bearish scenario target would be $105 and $124 at the end of Q2.
Key “bull flag” levels to watch
Weekly timeframe charts show AAVE in a month-long descending channel pattern that looks like a bull flag. Bull flags are bullish continuation indicators that occur when price consolidates lower in a parallel range after a period of strong uptrend. Theoretically, they dissolve after price breaks decisively above the upper trendline of the range, followed by an extended upward move equal to the height of the previous rally (called the flagpole).
The bull flag scenario now puts altcoin AAVE at risk of testing the lower trendline around $109, which coincides with the chart’s 200-week EMA. Interestingly, the level is also close to the temporary bearish target of the ascending wedge. But the flag pattern shows AAVE’s long-term bias to the upside. Therefore, the pair could bounce back from the lower trendline to a bull flag target of roughly $900 in 2022-2023 and increase by about 400 percent from the price of April 20. Conversely, a decisive break below the 200-day EMA could expose the AAVE to more selling and the next downside target could sit near a historical support/resistance level of $72.
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