Uniswap analysis: UNI price can double based on a classic technical pattern

Published at: June 29, 2022

Uniswap (UNI) market valuation could grow by 100% in the second half of 2022 as it paints a classic bearish reversal pattern.

UNI price bullish setup

Dubbed "inverse head and shoulders (IH&S)," the technical setup takes shape when the price forms three troughs in a row below a common support level (neckline), with the middle one (head) deeper than the other two (shoulders).

Additionally, it resolves after the price breaks above the support level.

The UNI price trend since May 23 checks all the boxes for forming an IH&S pattern, except the right shoulder. A retest of its neckline near $5.71 would form the right shoulder, increasing the possibility of an iH&S breakout scenario, as shown below.

As a rule of technical analysis, the price breaking out of an IH&S structure can rally by as much as the maximum distance between its head's lowest point and the neckline. So, UNI's IH&S's upside target comes to be around $9.78, up over 100% from June 2's price.

Conflicting Uniswap price signals

Uniswap's longer-timeframe charts bring attention to resistance levels that could keep UNI from touching their IH&S target.

That includes an interim resistance level of around $6 that has rejected UNI's price lower at least thrice since May. A successful break above the $6-level could have UNI face the February 2022 support of around $7.52 whose test preceded a 75% price rally to $12.48.23.

The $7.52-level also coincides with UNI's 20-week exponential moving average (20-week EMA; the green wave in the chart below), now near $7.90.

Conversely, a decisive pullback from the $6-resistance level could trigger a result in a bearish technical setup, dubbed as a "bear flag."

UNI has already been returning lower after testing levels around $6, which coincides with the flag's upper trendline. That leaves the UNI/USD pair two potential scenarios: decline toward the flag's lower trendline near $3.92, or rebound for a potential breakout above the upper trendline.

UNI's move toward $3.92 would risk triggering the bear flag breakdown scenario, meaning a 45%-plus decline to $2.75 when measured from June 2's price. On the other hand, a break above the upper trendline would invalidate the flag setup altogether.

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