Assess the risk Aave buyers will bear if they decide to buy the dip

Disclaimer: The information presented does not constitute financial, investment, trading or other advice and represents the opinion of the author only.

  • Indicators showed momentum firmly bearish for Aave
  • The lower timeframe range highlighted trading opportunities at the extremes

The volatility of Bitcoin [BTC] has been considerably weak over the past week. The start of the holiday season could mean thin order books and low liquidity and could take until after the New Year to resolve.

Read Aave’s [AAVE] Price Prediction 2023-24

As it stands, the $17,300 area has posed strong opposition to the bulls. Aave saw heavy selling pressure earlier in December and the retest of $63 as resistance meant further declines were likely.

The lower timeframe range highlighted an area where buyers could step in

Source: AAVE/USDT on TradingView

Aave traded in a range from $56.6 to $53.1. It was formed on December 19. At the bottom of this range was a pocket of liquidity, below a short-term support level at $53.7. Scalp longs can be attempted when visiting the lows of the range, targeting $55 and $56 as profit levels.

However, Aave’s longer-term view remained bearish. It saw a huge drop from $97 to $55 following the panic surrounding the collapse of FTX in early November. A look at the On-Balance Volume (OBV) revealed that the bulls were active in buying Aave tokens and defending the $50.6 support level. The OBV returned to levels it had been at since July.

However, this does not rule out the possibility of another decline. The market structure remained bearish and the psychological level of $50 could be tested again. The Relative Strength Index (RSI) has been below the neutral value of 50 since December 7, indicating that the bearish momentum was dominant. The moving averages also signaled downward pressure.

The $56 to $58 area can offer an ideal ideal short entry. Any movement beyond $58 would show that the bias has turned bullish again.

Open Interest Declines But CVD Has Recently Noted Gains

Assess the risk Aave buyers will bear if they decide to buy the dip

Source: Coinanalysis

The Open Interest and the CVD spot have resumed since December 19th. But the price traded in a range during this time. This suggested that silver was entering the market. In particular, the rise in spot CVD meant that buyers were interested in AAVE at these prices.

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However, since the end of November, these two measures have been in a strong downward trend. Therefore, the strength of the buyers in recent days could be quickly overwhelmed if Bitcoin runs into trouble at $16.6,000.

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