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  • Aave is on the verge of considerable retreat after rallying 222% in November.
  • AAVE/USD could dive to the 200 SMA if losses increase under the 50 SMA.

Aave has been one of the digital assets leading the recovery in the decentralized finance (DeFi) sector. The token has grown by 222% since the beginning of November. After hitting a barrier at $83, AAVE was forced into a correction. If declines continue, this token will extend the bearish leg to the support at $50.

Aave declines overshoot key levels

Following the rejection from November’s peak, Aave embarked on a gains-trimming exercise. Before the reversal, the price tried to break above the ascending parallel channel’s upper boundary resistance but failed.

The wall at $83 triggered more sell orders while buying pressure dwindled, culminating in declines below the middle boundary and the 100 Simple Moving Average. Tentative support at the 50 SMA and the channel’s lower limit did little to stop the selling pressure.

Meanwhile, AAVE is trading at $64 while fighting to reclaim the ascending channel position and then climb above the 50 SMA. If Aave closed the day below these two levels, the bearish leg to the 200 SMA at $50 would be validated.

AAVE/USD price chart

AAVE/USD 4-hour chart

The same 4-hour chart highlights a bearish divergence formed by the Relative Strength Index. Bearish divergences suggest that buying volume behind an asset has decreased and points to a potential correction. The divergence comes into the picture when the price creates a higher low pattern while the RSI forms lower highs, giving credibility to the bearish outlook.

AAVE/USD price chart

AAVE/USD 4-hour chart

According to Santiment, large volume holders are still increasing their holdings. The holder distribution metric shows that addresses having between 100,000 and 1 million AAVE shot up from 452 on November 14 to 456 on November 25, representing a 0.88% growth. The increase may seem small, but the volume moved by these whales is usually massive. Therefore, if the buying spree continues, Aave might renew the uptrend, thereby averting losses to $50 altogether.

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