Aave (AAVE) Has Been in a Prolonged Corrective Phase, But Price Action Suggests a Potential Bottom Formation

The higher time frame chart reveals a completed descending wedge structure, signaling a possible trend reversal.

Aave (AAVE) has been exhibiting interesting price action in the higher time frame, completing a descending wedge structure that suggests a potential trend reversal.

This analysis will delve into the technical aspects of AAVE's price movements and identify key levels to observe for trading opportunities.

Aave (AAVE) Peaks After Strong Rally

AAVE is currently undergoing a prolonged corrective phase after a strong rally that peaked at $402.27 in December 2021.

The Elliott Wave structure suggests an ABCDE correction, with wave E recently hitting a low near $162.61. This level is also close to the 0.786 Fibonacci retracement from the 2023 low to the 2023 high.

Moreover, the Relative Strength Index (RSI) on the monthly chart is showing signs of deep oversoldness, further indicating the potential for a relief rally in AAVE.

A final decisive breakout above the $200.00 (0.618 Fib) level would be needed to confirm a bullish reversal, with the next targets at $238.74 (0.5 Fib) and $277.33 (0.382 Fib).

However, failure to hold the $162.61 support could invalidate the reversal scenario, leading to a further decline toward $145.20 or even $84.23 in a bearish extension.

The successful breakout and retest of the $238.74 resistance would confirm the trend shift, setting the stage for higher price targets in the medium term.

Aave (AAVES) 1-Hour Chart Shows Early Breakout

The 1-hour chart suggests that AAVE is in the ending stages of a five-wave correction and is likely to be followed by a bullish breakout from its descending structure.

The initial wave (i) and retracement wave (ii) are expected to complete the breakout, while wave (iii) will provide the strongest confirmation if the price manages to stay above the $200 level.

A minor correction toward the $162-$165 range would still be valid within the bullish structure.

The key level to break remains $200, which coincides with the 0.618 Fibonacci retracement. If AAVE clears this level, it could rally toward $238.74 (0.5 Fib) and $277.33 (0.382 Fib), completing the five-wave structure.

If AAVE fails to hold above $162.61, it could retest the $145.20 support, delaying the bullish breakout.

The RSI must stay above 40 to sustain momentum, and the next key upside targets are $238-$277.

Aave (AAVE) is displaying early bullish signs, and the scenario will unfold more clearly with the breakout or fall from the support. A break above $200 would confirm the next leg up, while failure to hold support could lead to further declines and delay the uptrend.