The prospects of Ren (REN) persevering with its ongoing rebound to recent highs seem slim as a basic bearish reversal sample begins to emerge.
Dubbed head and shoulders, the setup seems when the value types three peaks, with the center peak (referred to as the pinnacle) longer than the opposite two peaks described because the left and proper shoulders. The bottoms of those peaks are supported by a neckline.
An illustration of the pinnacle and shoulders sample. Source: Corporate Finance Institute
The sample comes into play primarily when the value breaks beneath the neckline in a correction that follows the formation of the fitting shoulder. That prompts merchants to open quick entries beneath the neckline, with their very best goal at a size equal to the space between the pinnacle’s excessive level and the neckline.
What’s behind REN’s present setup?
REN has been forming what seems to be an upward sloping head and shoulder sample, supported by a rising neckline.
In element, REN value rose and declined right into a trough round mid-December 2021, forming the left shoulder. Later, it rebounded sharply to create a better peak — above the very best stage of the primary shoulder — after which fell over again.
REN has since rebounded once more and is now within the technique of forming its proper shoulder, as proven within the chart beneath.
REN/USD each day value chart that includes H&S setup. Source: TradingView
As a outcome, the value of REN could proceed its rebound till it completes its proper shoulder formation, which could possibly be close to the 50-day exponential shifting common; the velvet wave, close to $0.67. That is due to the wave’s current historical past of limiting REN’s value rebounds.
Additional promote stress might additionally come from the 0.618 Fib line close to $0.633 because of its historic relevance as each help and resistance. Overall, a pullback appears to be like more likely to occur that will have REN make the fitting shoulder. Meanwhile, a correction in direction of the neckline, adopted by a break beneath it, would affirm the pinnacle and shoulder setup.
In doing so, the transfer could shift REN’s draw back goal to $0.30, measured after including the space between the pinnacle’s excessive and the neckline to the breakout level. That is round 50% beneath the present buying and selling value at $0.59.
The long-term outlook remains to be bullish
REN’s head and shoulder setup comes as part of a wider value correction that has seen the token shed practically 70% of its worth from a document excessive close to $1.92 in Feb. 2021.
On a longer-timeframe chart, REN seems to have been solely consolidating inside an enormous symmetrical triangle, suggesting that its correction towards $0.30 could find yourself inflicting a rebound towards $1.20.
REN/USD weekly value chart that includes a symmetrical triangle. Source: TradingView
Bullish cues for REN can also come from the expansion of its backer of the identical identify. Ren’s core product, RenVM, brings interoperability to the decentralized finance ecosystem (DeFi). It holds customers’ digital property as they transfer between blockchains utilizing zero-knowledge proofs over an sMPC primarily based protocol.
Related: 3 explanation why REN value is up 340% from its July swing low
REN acts as a bond to run the so-called Darknodes that energy RenVM’s sMPC community. Those who deposit 100,000 REN are capable of run these Darknodes and in consequence, are capable of earn rewards in Bitcoin (BTC), Ether (ETH), Zcash (ZEC), and different tokens.
The complete worth locked (TVL) of the digital property minted on all chains — which incorporates Ethereum, Binance Smart Chain, Solana, Polygon, Fantom, Avalanche, and Arbitrum — by RenVM got here out to be $1.05 billion at press time in comparison with $6.6 million in June 2021.
Multi-year historical past of quantity and complete worth locked in RenVM. Source: Highcharts.com
Meanwhile, the whole quantity of quantity transacting by means of RenVM on all chains reached an all-time excessive of $8.89 billion on January 4th, 2022. That reveals a gradual improve within the Ren community’s adoption, thus boosting the upside prospects of REN token.
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