REN price at risk of 50% drop after a bearish trading pattern shows up

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The prospects of Ren (REN) persevering with its ongoing rebound to contemporary highs seem slim as a traditional bearish reversal sample begins to emerge.

Dubbed head and shoulders, the setup seems when the worth varieties 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.

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An illustration of the pinnacle and shoulders sample. Supply: Company Finance Institute

The sample comes into play primarily when the worth breaks beneath the neckline in a correction that follows the formation of the precise shoulder. That prompts merchants to open quick entries beneath the neckline, with their ultimate goal at a size equal to the gap 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.

Intimately, REN value rose and declined right into a trough round mid-December 2021, forming the left shoulder. Later, it rebounded sharply to create the next peak — above the best degree of the primary shoulder — after which fell once more.

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. Supply: TradingView

Consequently, the price of REN could proceed its rebound till it completes its proper shoulder formation, which could possibly be close to the 50-day exponential transferring common; the velvet wave, close to $0.67. That’s due to the wave’s latest historical past of limiting REN’s value rebounds.

Further promote strain might additionally come from the 0.618 Fib line close to $0.633 on account of its historic relevance as each assist and resistance. Total, a pullback appears to be like prone to occur that may have REN make the precise shoulder. In the meantime, a correction in the direction of the neckline, adopted by a break beneath it, would verify the pinnacle and shoulder setup.

In doing so, the transfer could shift REN’s draw back goal to $0.30, measured after including the gap between the pinnacle’s excessive and the neckline to the breakout level. That’s 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 report 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. Supply: TradingView

Bullish cues for REN may additionally come from the expansion of its backer of the identical title. 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.

Associated: 3 reasons why REN price 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 that 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 total value locked (TVL) of the digital property minted on all chains — which incorporates Ethereum, Binance Sensible 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 whole worth locked in RenVM. Supply: Highcharts.com

In the meantime, the whole quantity of quantity transacting by RenVM on all chains reached an all-time excessive of $8.89 billion on January 4th, 2022. That reveals a gradual enhance within the Ren community’s adoption, thus boosting the upside prospects of REN token.

The views and opinions expressed listed below are solely these of the creator and don’t essentially mirror the views of Cointelegraph.com. Each funding and buying and selling transfer entails threat, you must conduct your personal analysis when making a choice.