Over the weekend, AAVE experienced a resurgence following China’s economic stimulus measures, triggering positive movements in the entire cryptocurrency market. In the past 24 hours, AAVE surged by almost 7%, reaching $154 at the time of writing.
These gains marked a notable recovery for the token, which had been underperforming earlier in the week.
As a result of this upward trend, AAVE broke out of the middle line of its upward channel on the daily chart, indicating a strengthening bullish sentiment.
For AAVE to breach the upper boundary of this channel, it will require substantial buyer support.
The consecutive three green bars on the volume histogram suggest that buyers have dominated the price movement, facilitating AAVE’s breakout above the middle line.
Moreover, the on-balance volume (OBV) indicator has been on an upward trajectory, surpassing the smoothing line, signaling a shift towards bullish sentiment.
To confirm the bullish outlook and break above the ascending channel, AAVE must overcome the resistance level at $170, which corresponds to the 0.236 Fibonacci level.
Conversely, a drop below the support level at $134 would invalidate this pattern.
Positive Outlook from AAVE Exchange Outflow Data
The data on AAVE exchange outflows presents a bullish scenario, indicating that buyers might continue to overpower sellers. Traders are withdrawing their AAVE tokens from exchanges at a significant rate.
On October 12, exchange outflows hit a one-month peak, reflecting a reluctance to sell among holders.
Increased withdrawal of tokens from exchanges alleviates short-term selling pressure, potentially setting the stage for a robust bullish trend.
Concerns from Bearish Technical Indicators
The Chaikin Money Flow (CMF) reveals a continuous outflow of capital from AAVE, with a current score of -0.17, indicating a bearish trend.
Despite the price increase, the CMF’s formation of lower lows suggests a weak current trend.
Additionally, the Moving Average Convergence Divergence (MACD) remains below the signal line, signaling a bearish bias. Nevertheless, a northward movement of the MACD line, surpassing the signal line, would confirm an uptrend for the altcoin.
Assessing the Long/Short Ratio
Derivative traders’ sentiment, as reflected in the long/short ratio on Coinglass, appears bearish. The ratio dropped from a neutral value of 1 to 0.87 in the last 24 hours, indicating hesitancy among market participants regarding a sustained rally.
On Binance, there has been a significant drop in accounts opting for long positions on AAVE, decreasing from 60% to 47%, while short positions have risen from 39% to 52%.
These changes in the long/short ratio suggest that as AAVE witnessed gains, traders increased their short positions, showing doubt about the durability of the upward trend.