Price vulnerable to profit-taking as RSI hits overbought zone

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Decentralized lending platform AAVE has had a stellar performance over the past week. Spurred on by Switzerland based bank SEBA’s eagerness to join the AAVE network, the alt has captured a near 70% hike over the last four days. The proposal is shaping to be huge for the AAVE network, which if accepted, would open the doors to large scale liquidities from SEBA’s clients.

Naturally, the charts captured AAVE’s turbulent bull run over the past couple of days. However, the RSI’s overbought readings the MACD’s potential bearish crossover threatened to halt AAVE’s climb. At the time of writing, AAVE traded at $270, up by 5% over the last 24 hours.

AAVE 4-hour time frame

Source: TradingView

After finding support at an earlier established demand zone between $176 and $156, AAVE embarked on a massive uptrend. As a result, the alt flipped its 200-SMA (green) for the first time in over a month and escaped the wrath of short-sellers. However, a 70% hike in the last four days has made AAVE prone to profit-taking.

Multiple sell signals were also present for those wishing to cash their gains. For instance, AAVE had tagged its 23.6% Fibonacci level, which was identified using AAVE’s May top of $670 and its 13 December bottom of $162. Fibonacci levels often influence buying or selling behavior by helping with entries and exits. Even if AAVE manages to flip $280, the presence of an upper trendline (yellow) could restrict its ascent. On-chain metrics flashed some warnings signs as well.

Indicators

AAVE’s Relative Strength Index not only traded in the overbought zone but also formed a rising wedge. The pattern is usually observed prior to a decline. Moreover, a bearish crossover along the MACD was just a stone’s throw away. Sellers tend to respond once the fast-moving average line (blue) crosses below the Signal line (orange), which is perceived as an unfavorable sign.

Conclusion

Should the price fail to register an immediate close above the sloping trendline (yellow) at $300, expect a sell-off. In case the price slips below $250, the presence of a support zone between $206-$220 would lend a helping hand to AAVE.

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