Uniswap price analysis: Is it time to book profits?
Uniswap could extend its correction in the short term
The cryptocurrency markets made a smart turnaround in July and Uniswap has been one of the outperformers. Although the token gave back some of its gains in the last few days of the month, it still managed to rise 66% in July. However, since then, UNI has been witnessing profit-booking, which has continued as of 2 August 2022.
The rally in Uniswap started just after the announcement by the popular trading app Robinhood that it had onboarded UNI on 14 July.
Another positive for Uniswap was the announcement of likely dates for Ethereum’s merge where the blockchain transitions from proof of work (PoW) to proof of stake (PoS) in September. Along with Ether, several decentralised finance tokens including Uniswap and Layer 2 protocols have benefited from the hype around the upgrade, according crypto trader Luke Martin.
Another factor that could be getting the UNI holders excited is the discussion regarding the “fee switch”. Currently, Uniswap charges 0.3% trading fees, which is distributed to the liquidity providers (LPs) for that specific trade.
If the fee switch is turned on, 0.25% of the trading fees will go to the LPs while the remaining 0.05% could be used for various activities, with one option being to distribute among token holders. Although this is still in the discussion stage, it may have attracted buying from traders who expect to be rewarded for holding their UNI token if the switch is activated.
Could buyers step in at lower levels and arrest the decline? Could Uniswap go up? Read the UNI price analysis to find out.
Uniswap price technical analysis: Weekly chart
UNI’s price has been in recovery mode for the past several weeks. The bulls pushed the price above the 20-week exponential moving average (EMA) last week, but the long wick on the candlestick indicates selling near the psychological level of $10.
The 20-week EMA is flattening out and the relative strength index (RSI) is just below the midpoint, indicating a range-bound action in the near term.
If the price breaks below the 20-week EMA, the bears will try to pull the UNI/USD pair to $6.21. If the price rebounds off this level, the bulls will again try to push the pair above the overhead resistance at $10. If they succeed, the pair could rally to the 50-week simple moving average (SMA), which may again act as a strong hurdle.
Alternatively, if the price turns down and slips below $6.21, it will suggest that the recent recovery was a bear market rally. The pair could then decline to $5.21.
Uniswap price technical analysis: Daily chart
UNI’s price has been rising inside an ascending channel pattern for the past several days. The bulls pushed the price above the channel on 28 July, indicating a pick-up in momentum. However, the up-move could not climb above the overhead resistance at $10.
This may have tempted several short-term traders to book profits. That pulled the price back into the channel on 31 July. Strong selling has extended the correction to the 20-day EMA.
The zone between the 20-day EMA and the support line is likely to attract strong buying from the bulls. If that happens, the pair could again rally toward the resistance line. A break and close above $10 could open the doors for a rally to $12.
Contrary to this assumption, if the price slips below the channel, the pair could decline to the 50-day SMA. A break and close below this support will suggest that the up-move may have ended in the near term.
Uniswap: Buy or sell this week?
Uniswap has pulled back to the 20-day EMA, which could act as a strong support. If the pair rebounds off this level, Uniswap’s price analysis suggests that a retest of $10 is possible. On the other hand, a break below the 20-day EMA could sink the pair to the support line of the ascending channel.
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.