Yearn Finance’s governance token YFI continued its winning streak as its price entered Thursday’s session with a weekly gain of around 30%.
The YFI/USD rate surged early in the European session, reaching $31,884 before falling due to profit-taking sentiment. This is the second attempt to break the $30,000 level in the last 24 hours.
Nonetheless, YFI appears oversold after a near-parabolic rebound from its quarterly low of $7,015. This corresponds to a downward correction or consolidation unless the trend is neutralized to provide traders with a stable buying level.
From a technical perspective, we find that YFI is providing two separate bias indicators: the head and shoulders pattern, which indicates a bearish trend, and the ascending triangle pattern, which indicates a bullish trend. The detailed outlook is as follows:
Bearish YFI
The chart below shows YFI at the completion of a head and shoulders pattern.
Yearn Finance's H&S Pattern in an uptrend. Source: YFIUSD on TradingView.com
In retrospect, an H&S chart formation occurs when an asset forms three peaks in succession at its primary support level, with the middle being the highest above the other two at approximately the same height. Traders interpret H&S as a bullish-to-bearish reversal pattern, indicating that the current uptrend is being exhausted.
YFI has just formed the right and final shoulder (or peak). Technically, the cryptocurrency should continue its downward trend towards the baseline (the longest black trend line). This creates an H&S pattern, but another bearish break below the baseline is needed to confirm it in its entirety.
If this happens, YFI/USD risks falling by the length of its highest peak. Approximately $10,000-12,000 in length, this pair will cost at least $20,000 upon H&S breakdown.
an optimistic outlook
It is also possible that YFI will not retreat towards the H&S analysis target from the so-called right shoulder high. Instead, the cryptocurrency may continue to test the $30,000 resistance level with support from the H&S baseline, which will now be an uptrend line support.
In this case, YFI will form an ascending triangle pattern (bullish pattern). If this happens, the cryptocurrency will attempt to break above the $30,000 level. Once that happens, the upside target will shift to levels closer to $50,000.
Yearn Finance's Ascending Triangle formation. Source: YFIUSD on TradingView.com
The technical breakout target for a technical bullish triangle is the maximum distance between the two trend lines. That’s about $20,000.