Is AAVE Overbought After a 30% Weekly Surge? Analyzing the Recovery and Future Projections

AAVE has seen a dramatic price surge, rising by 9% during a single U.S. trading session and registering a 30% weekly gain. The altcoin reached $176, breaking a two-year accumulation trend, sparking speculation about whether this bullish momentum can continue. As the AAVE price continues to climb, analysts are assessing whether it has entered overbought territory, signaling a potential pullback.

Key Takeaways

• Breakout from Two-Year Accumulation Trend: AAVE saw a significant breakout at $153, backed by substantial trading volume, marking a decisive end to its two-year accumulation phase.
• Rounding Pattern Formation: The price action on the weekly chart hints at a Rounding Pattern, signaling a transition from a downtrend to accumulation and now a momentum-driven recovery.
• Potential for Short-Term Pullback: Despite strong whale accumulation and bullish sentiment, overextended technical indicators suggest a potential pullback as the market stabilizes.

AAVE Price Rally: Overbought or Sustainable?

Last week, AAVE soared from $134 to $176, marking a 32% rise and breaking through the $153 resistance level. This surge follows a prolonged accumulation phase, with analysts now monitoring whether this marks the start of a long-term recovery or if a bearish correction is imminent.

Rounding Pattern Signals Potential for Further Growth

Source: CoinGape

The current chart pattern, a Rounding Pattern, often signals a reversal from long-term downtrends to sustained recoveries. This saucer-like shape could indicate that AAVE is transitioning into a new growth phase. If the momentum continues, the next target for AAVE is the $200 psychological resistance level, followed by a potential rise to $260.

Whale Accumulation Bolsters Recovery

Santiment data reveals that whale wallets holding between 1 million to 10 million AAVE tokens have been accumulating since early August 2024, now holding a combined total of $4.2 million in AAVE. This large-scale accumulation suggests that market movers are betting on a continued rally, which could significantly influence AAVE's short-term performance.

Technical Indicators Hint at Pullback Risk

Source: CoinGape

However, AAVE’s price has pulled far away from its 20-day and 50-day exponential moving averages (EMA), which may signal an impending correction. Additionally, the Average Directional Index (ADX) has surged to 35%, suggesting that buyers could soon face exhaustion.

The 30-day Market Value by Realized Value (MVRV) ratio also surged by 23%, indicating that short-term traders are currently in profit. Historically, when the MVRV ratio hits these levels, speculative traders often cash out, leading to short-term price corrections.

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FAQs

Is AAVE currently overbought?

Yes, technical indicators suggest that AAVE may be overbought after its recent 30% rally, increasing the likelihood of a temporary pullback.

What are AAVE’s next price targets?

If the bullish trend continues, AAVE could challenge the $200 resistance level and potentially surge to $260. However, a short-term pullback could happen first.

What role do whales play in AAVE’s price movement?

Whales have been accumulating AAVE tokens, which signals confidence in the token’s long-term potential. This accumulation could support further price growth or stabilize any upcoming corrections.