Over the last 30 days, Pendle [PENDLE] has experienced a remarkable surge, reaching a new monthly peak of $5.13, marking a 43% increase in trading activities.
Despite the significant rise, the $5 price point has historically posed a strong resistance barrier. The question now is whether Pendle can convincingly breach this level.
PENDLE encounters a barrier
As of the current moment, a noteworthy obstacle has emerged, attracting short sellers, as evidenced by the appearance of red daily candlesticks. This situation might prompt short-term holders to engage in profit-taking activities.
Furthermore, key technical indicators on the chart have indicated overbought conditions, signaling a potential retracement. Nevertheless, Pendle has been establishing higher highs and higher lows, indicating a bullish trend in the market.
Given this scenario, it might be more prudent to consider a long position rather than a short one. There are two potential long-term approaches to consider.
The first strategy involves re-entering at a short-term support level just above $4 and the 50-day EMA (blue line), with a bullish target price set at $5. This move could yield a potential gain of 23%, under the condition that Pendle retraces to $4.
The second approach entails a retest and the transformation of $5 into a support level (highlighted in white), enabling bulls to target $6, offering an 18% potential gain.
An infringement below $4 should be seen as an invalidation of the long position, prompting the placement of a stop loss slightly below that level.
Pendle whales reduce their exposure
While the recent uptrend has displayed strength, indicated by a 43 reading on the ADX (Average Directional Index), the actions of whales warrant caution.
Historically, when whales accumulate more assets compared to retailers (denoted by the green Whales vs Retail Delta), Pendle tends to experience an upward surge. Conversely, a reduction in whale exposure often precedes a pullback in prices.
Starting from early October, whales had been adding more Pendle to their portfolios, propelling an upward trajectory in prices. However, at present, these whale players have slightly decreased their exposure, potentially contributing to the profit-taking activity observed at the $5 barrier.
Supporting this observation is data from Santiment, which indicates a subtle decline in the Supply Held By Whales (blue). Additionally, a notable increase in supply outside exchanges suggests an accumulation trend, possibly among retailers, which may not necessarily lead to a surge in Pendle prices.
During the August market downturn, there were spikes in both accumulation trends, primarily led by whales, following which Pendle experienced a rally. However, a robust surge in Pendle prices could be challenging if whales adopt a more passive role in the market.
Therefore, a potential retreat from the $5 resistance level could enhance the feasibility of the first long-term strategy. However, a breach below the dynamic support provided by the 50-day EMA would invalidate the bullish perspective.
Disclaimer: The opinions expressed in this content do not constitute financial, investment, trading, or any other form of advice and solely represent the views of the author.