Uniswap (UNI) Price Surges Over 10% Following Unichain Launch, But Caution Urged Amid Overbought Conditions

Uniswap (UNI) saw its price jump over 10% after Uniswap Labs announced the launch of its Layer-2 solution, Unichain. This surge has pushed the Relative Strength Index (RSI) into overbought territory, indicating strong buying activity.

However, this rapid increase has raised some caution in the market. When an asset is overbought, it might signal a pullback is coming. Key resistance and support levels will be crucial for predicting UNI's next moves.

Right now, UNI’s RSI sits at 80, up significantly from 58 within just a few hours of the Unichain news. This quick rise shows that investors are reacting positively and buying in.

The RSI measures the speed and change of price movements. It helps determine whether an asset is overbought or oversold. The scale runs from 0 to 100. Values above 70 suggest overbought conditions, while those below 30 indicate oversold conditions.

With an RSI of 80, UNI has clearly entered an overbought phase. This means the recent price surge may have pushed the asset beyond its fair value in the short term. Typically, overbought conditions can lead to a correction as buying interest starts to wane.

Investors should stay cautious. If profit-taking begins, prices could become more volatile and face downward pressure. The current high RSI indicates that UNI's rapid rise might soon hit resistance, possibly leading to a short-term price correction.

Looking at trend strength, UNI’s Average Directional Index (ADX) is now at 28, up from 19 in just a few hours. This increase shows that the strength of the current trend is gaining momentum. The ADX measures trend strength, regardless of direction.

The ADX ranges from 0 to 100. Values above 25 generally indicate a strong trend, while those below 20 suggest a weak trend. Even though UNI's ADX is at 28, it’s still below levels seen in previous months when trends were much stronger.

While UNI’s price jumped over 10% in a day, the current ADX suggests that the trend might not be as strong as it could be. This means there’s some momentum, but it’s not yet at a level that indicates a sustained movement.

Traders should keep an eye on this. The current trend strength may not be enough to prevent a reversal or significant volatility soon.

As for price predictions, UNI’s Exponential Moving Average (EMA) lines are showing a clear uptrend. The short-term lines are above the long-term ones, maintaining a good distance between them. This setup usually signals a bullish trend, indicating that recent price action has been favorable.

EMA lines are a type of moving average that gives more weight to recent prices. This makes them more responsive to short-term movements. Traders use them to identify ongoing trends and potential reversals by looking at the relationship between short-term and long-term averages.

However, as the ADX indicates, the current trend isn’t particularly strong despite the bullish EMA pattern. If the uptrend continues, UNI’s price could test resistance levels at $8.65 and $9.52. Breaking through these levels could push the price as high as $12, which would be its highest since June 2024.

On the flip side, if the news about Unichain isn’t enough to keep the momentum going, UNI might test support levels around $7.7 and $7.5. There’s even a chance it could fall to $6, representing a potential 28% decline.