The DeFi index (DEFIPERP) has been moving upwards for the entirety of December and could soon break out from a descending resistance line.
On December 4th, DEFIPERP hit a low of $ 1,927 and rebounded considerably, creating a very long bottom wick (green icon). This is seen as a sign of buying pressure. The rebound also served to validate the $ 2,000 area as support. This is both a horizontal support area and the 0.618 Fib retracement support level.
The index has been increasing since and reached a high of $2,837 on Dec 27. After a short-term drop, it initiated an upward movement that is still ongoing.
Breakout attempt
Cryptocurrency trader @TradingTank tweeted a chart of the DeFi index, stating that an increase is expected.
DEFIPERP is currently trying to break out of a descending resistance line that has been in place since November 10th. This would confirm that the current fix is complete.
Technical indicators support the possibility of a breakout.
The MACD, which is created by a short and long term moving average (MA), is moving higher and is almost positive.
The previous time such a movement transpired in the MACD was on Aug 2021 (green circle) and preceded the upward movement to the current yearly high.
On top of that, the RSI is moving higher and is above 50. This is a sign of bullish momentum and supports MACD readings.
If a breakout transpires, the closest resistance area would be at $3,050.
However, the two hour chart is showing slight signs of weakness.
Firstly, DEFIPERP is trading inside an ascending parallel channel, which is considered a corrective pattern. This means that a breakdown from the channel would be the most likely scenario.
Second, there is a considerable bearish divergence that has developed in the RSI. This often precedes the drops.
Therefore, it is possible that a short-term drop will transpire prior to the eventual breakout. If one occurs, the support line of the channel and the $2,580 area would be expected to initiate a bounce.
