Aave price prediction: Upside target met but here comes the sell signal

Summary:

The Aave price has been responding perfectly to technicals lately. That may be a bad thing for bulls as an important indicator is now flashing red.

The Aave price has been responding perfectly to technicals lately. That may be a bad thing for bulls as an important indicator is now flashing red.

Aave is last trading at $272.50, down $4.52 (-1.68%).

Decentralized finance (DeFi) token Aave has been on a great run. Over the last seven days, the price has gained 30% and is trading just short of my price prediction, published on the 23rd of June:

“The daily chart clearly shows the significance of the trendline at $206.00. If the Aave price can remain above this trend in today’s session, it would validate the price reversal. Moreover, bulls may then target the horizontal resistance of $277.00.“

The impressive price action came as Aave recovered from steep losses it suffered on the 22nd of last month: Again, the market gave plenty of warning. On the 13th, I wrote:

If Aave closes below $276.60 today, a return to the May $206.81 low looks probable.

Now, this is not to massage my ego. It’s to highlight that the Aave price is responding extremely well to technicals indicators.

Unfortunately, a significant moving average indicator is signalling the price may be about to turn lower.

Aave ‘Death Cross’

A death cross is when the 50-day moving average trade below the 200 DMA. As of yesterday, the 50 DMA at $301.00 is beneath the 200, at $302.91. This is considered extremely bearish and indicates that price momentum has turned from a long-term uptrend and is now accelerating south.

Of course, it doesn’t take a genius to come to that conclusion. However, with the price having just achieved the upside target, this occurrence could encourage some profit-taking from longs who rode the rally higher.

If the Aave price fails to close above $277.00 in today’s session, the recent rally may be reversed. On that basis, I would expect the price to retreat to the long term uptrend at $220.00. Furthermore, the bias will likely remain negative until the price recovers territory above the 200 DMA.

Should that happen, the bearish view becomes invalid and points to an improving technical outlook.