PancakeSwap (CAKE) Price Reaches 175-Day High Behind Impressive Burn Metrics
Has CAKE Started a Bullish Trend Reversal? | Credit: Hameem Sarwar
Key Takeaways
- PancakeSwap (CAKE) broke out above two long-term resistances.
- CAKE burn metrics show a deflationary supply since September 2023.
- Is the ongoing price increase a relief rally or a bullish trend reversal?
The CAKE price has increased since Aug. 5, creating a higher low in November. After breaking out from a confluence of resistances, CAKE accelerated its upward movement last week, leading to a 175-day high.
Despite the impressive increase, it is unclear if the upward movement is the beginning of a new bullish trend reversal. Let’s examine the CAKE price action and see what awaits in the next few months.
CAKE Price Breaks Out
The weekly time frame CAKE chart shows that the price has increased since its low of $1.20 on Aug. 5. Initially, the upward movement was thwarted by the $2.15 horizontal resistance area and a descending resistance trend line (black).
However, CAKE successfully broke out from the diagonal resistance at the start of November before creating a bullish engulfing candlestick last week, taking it above the $2.15 resistance area.
On Nov.25, the PancakeSwap price reached a 175-day high of $3.18 before falling slightly, creating a long upper wick. Despite this decline, CAKE still trades well above the $2.15 horizontal area and the resistance trend line.
If the increase continues, the next resistance will be at $3.70, created by the 0.618 Fibonacci retracement resistance level and a horizontal resistance area.
Technical indicators support the upward movement. The Relative Strength Index (RSI) and Moving Average Convergence/Divergence (MACD) are both increasing. The former is above 50 while the latter is above 0, both signs of a bullish trend. So, the weekly time frame suggests the upward movement will continue.
CAKE Burn Stats
Positive PancakeSwap news regarding burn metrics is that $26 million worth of CAKE has been burned since the beginning of the deflation period in September 2023. The weekly supply change shows a decline of over 500,000 tokens in the last two weeks alone.
The CAKE supply has fallen from roughly 400 million in September 2023 to about 382 million this week. Most of the burn occurs because of PancakeSwap v2 and v3 trading fees, while roughly 20% is from the prediction markets. Last week had the highest-ever weekly burn in USD terms.
Despite this, the daily time frame chart casts doubt on whether the price has started a bullish trend reversal.
Bullish Trend Reversal?
While the CAKE price action and indicator readings are bullish, the wave count gives an unclear CAKE prediction.
Between October 2023 and April 2024, CAKE created an upward A-B-C structure. Then, it completed a five-wave downward movement (black). This suggests that the long-term trend is bearish, and price increases are relief rallies.
Additionally, the increase since the Aug. 5 low is a five-wave structure. So, the CAKE price may have started another A-B-C structure and is currently in wave C, which can end at the 0.618 Fibonacci retracement resistance at $3.70.
So, the price action, indicator readings, and wave count give conflicting signs. While the price action and indicator readings are bullish, the wave count implies the ongoing increase is just a relief rally.
Since all three predict an increase toward $3.70, the reaction once the CAKE price reaches that level can determine the long-term trend’s direction.
Long-Term Trend Unclear
After breaking out from a diagonal and a horizontal resistance level, the CAKE price targets the next horizontal and Fibonacci resistance at $3.70.
The reaction once it reaches that point will determine whether the increase is a bullish trend reversal or just a relief rally.
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