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Yearn.Finance (YFI) is bouncing back after a sharp rally that saw it gain 125% in five days. The long-term trend appears to be upward.
YFI has been declining since reaching an all-time high of $95,000 in May 2021. The bearish move was initially limited within a descending wedge, which is considered a bullish pattern. As a result, an outbreak seemed to be the most likely scenario.
However, this did not happen as the price broke out of the wedge in May. The breakdown led to a low of $4,018, which was only slightly above the all-time low of $3,000.
During this period, the weekly RSI dropped to a new all-time low within oversold territory. The indicator has been rising since then, but has yet to break out of the downtrend line (green) and is still below 50.
YFI is currently facing resistance (red icon) from the wedge support line.
Retrieving this support line along with a decisive clear RSI above 50 will be required for the trend to be considered bullish.
YFI is breaking out
Cryptocurrency trader @TehLamboX tweeted a YFI chart, stating that the price could soon break above $7,000.
Since the tweet, the price has decisively broken above this level. Additionally, it has broken out of a descending resistance line that was previously in place since the beginning of the year. Breakouts from such long-term structures usually mean that the previous trend has come to an end.
If correct, this would mean that YFI has now started an uptrend. This was also coupled with a clear RSI above 50, further increasing its legitimacy.
If the upside continues, the main resistance area will be at $18,300, created by the 0.382 Fib retracement resistance level and a previous support area, which is now likely to provide resistance.
Wave count analysis
Since the June 18 bottom, YFI has been trading in a bullish parallel channel. But, he managed to escape from it on July 29.
Due to this breakout, the most likely wave count indicates that the price has started a five-wave uptrend and is currently in the process of fourth wave pullback.
If correct, it will bounce back to the resistance line of the previous channel before continuing its upward move towards the $18,300 resistance area described earlier.
A decline below the wave high (red line) at $8,087 would invalidate this particular wave number.
For Be[in]Crypto’s latest Bitcoin (BTC) analysis, click here
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