AAVE is set for a 20% rally if support levels hold.
Aave price is retesting the support area between $117.53 and $112.48, looking for a reversal soon.
On-chain data paints a bullish picture as AAVE’s long-short ratio is above one, and the NPL metric shows negative spikes.
A daily candlestick close below $112.48 would invalidate the bullish thesis.
Aave (AAVE) price is retesting its major support level and bouncing 5.5% higher at the time of writing on Wednesday. On-chain data supports the bullish thesis and suggests a rally is in the offing, as evidenced by AAVE’s long-short ratio above one and the Network Realized Profit/Loss (NPL) indicator showing a negative spike.
AAVE price looks promising
Aave price is retesting its support area between $117.53 and $112.48. This area could serve as a major support zone, roughly coinciding with three key levels.
The daily support level is $117.53.
The 50-day exponential moving average (EMA) is located around $113.75.
The 50% retracement of the price from a low in early August to a high in late August at $112.48.
At the time of writing on Wednesday, AAVE is retesting the support area and rebounding 5.5% higher to trade at $123.17.
If this support area holds, AAVE could rally 20% to retest its daily resistance at $142.69.
The Relative Strength Index (RSI) on the daily chart is breaking above its neutral level of 50, and the Awesome Oscillator (AO) is still trading above its neutral level of zero. If the bulls are indeed making a comeback, then both momentum indicators should maintain their positions above their respective neutral levels. Such a development would add a tailwind to the recovery rally.
The AAVE long-short ratio on Coinglass also stands at 1.04, supporting the bullish outlook. This ratio reflects the bullish sentiment in the market, as a number above one suggests that more traders anticipate the asset’s price to rise.
On-chain data provider Santiment’s Network Realized Profit/Loss (NPL) indicator measures a daily network-level Return on Investment (ROI) based on the coin’s on-chain transaction volume. It is generally used to measure market pain. Sharp spikes in a token’s NPL indicate that its holders are, on average, selling their wallets at a significant profit. On the other hand, sharp declines imply that the coin’s holders are, on average, realizing losses, suggesting panic selling and investor capitulation.
The NPL indicator fell from 853,290 to -1.67 million from Tuesday to Wednesday for AAVE. This negative drop indicates that holders were, on average, realizing losses.
However, over the same period, the supply of AAVE on platforms decreased by 2%. This decrease in supply on platforms indicates that investors are moving AAVE tokens into wallets and reducing selling activity, signaling a bullish outlook and further denoting investor confidence in AAVE.
Despite the bullish thesis indicated by both on-chain data and technical analysis, the outlook will shift to bearish if AAVE’s daily candle closes below the lower boundary of the support zone at $112.48. This scenario could lead to a 4% drop to retest its August 19 low at $107.55.
Follow me, give me a like, there are no commissions.
