UMA price analysis: a relief rally looks likely

UMA, battered by the turmoil around LUNA, may attempt a recovery in the next few days

The crypto markets are witnessing a massive meltdown exacerbated by the collapse of Terra’s LUNA token and the TerraUSD (UST) stablecoin. Because of the fear of losing their entire investment, traders tend to dump assets during panic. That could be one of the reasons for the sharp fall in UMA in the past few days. The buyers are attempting to offer support near the $2 level as of 12 May 2022.

UMA is ranked 150th by market capitalisation, according to coinmarketcap, and has a 24-hour trading volume of about $70m. Although the trading platform eToro recently announced the listing of the UMA token, the news has not made an impact on the price in the current bearish environment.

Has the correction ended? Could UMA go up? Read the UMA price analysis to find out what the charts suggest.

UMA-USD weekly chart
UMA-USD weekly chart

UMA technical analysis: weekly chart

UMA’s price has been in a downtrend for the past several weeks. The bears have been defending the 20-week exponential moving average (EMA) since December 2021. 

The relative strength index (RSI) has been trading below 50 since the end of November 2021, indicating that the momentum remains favourable to the bears.

The selling picked up momentum this week after bears pulled the price below the strong support of $4.30. This has dragged the RSI near the oversold territory, signalling that the selling may have been overdone in the short term. 

This may result in a relief rally or consolidation in the next few days. The critical level to watch on the upside is the 20-week EMA. The buyers will have to push and sustain the price above this level to indicate a potential change in trend. Until then, bears are likely to sell on every minor rally.

UMA-USD daily chart
UMA-USD daily chart

UMA technical analysis: daily chart

The buyers repeatedly pushed UMA’s price above the 20-day EMA in the past few days but could not clear the overhead hurdle at the 50-day simple moving average (SMA). This may have emboldened the bears, who sold aggressively on 9 May and pulled the price below the critical support of $4.30.

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The bulls pushed the price back above the level on 10 May but the long wick on the day’s candlestick suggests that bears sold at higher levels. The selling renewed on 11 May and the UMA/USD pair started the next leg of the downtrend.

The incessant selling of the past few days has pulled the RSI deep into oversold territory. This suggests that the pair could be ready for a sharp pullback or consolidation within the next few days.

If the price turns up from the current level, the pair could rally to the breakdown level of $4.30. This is an important level to watch out for because a break and close above it will suggest that the markets have rejected the lower levels. That could result in a rally to the 50-day SMA.

Conversely, if the price turns down sharply from the overhead resistance at $4.30, it will indicate that the sentiment remains negative and traders are selling on rallies. The bears will then again try to resume the downtrend and sink the pair to $1.

UMA: Buy or sell at current levels?

The bears remain in firm control but the oversold levels on the RSI suggest the possibility of a recovery. UMA’s price analysis suggests that the pair could rise to $4.30 where it is likely to face stiff resistance from the bears. Conversely, if the price breaks below $2, the decline could extend to the last psychological support at $1.

 The views and opinions expressed in the article are those of the author and do not constitute trading advice. Trading and investing involve substantial risks and you should do your own research or contact your financial adviser before arriving at a decision.

Further reading

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