Disclaimer: The findings of the following analysis are the only opinions of the writer and should not be considered investment advice
Since hitting his lifetime milestone on Sept. 2, Cardano (ADA) has been on a steep descent that practically moved it under all of his EMA ribbons. Over the past 19 days, ADA has formed a bearish flag on the daily chart, while the 20 EMA has held firm.
As of now, somewhat weak readings from the technical indicators coupled with the bearish flag pattern have positioned ADA for a possible retest of the flag’s lower trendline in the coming days.
As of going to press, ADA was trading at $1.13, down 3.38% in the past 24 hours.
ADA daily chart
Since its ATH, ADA has formed a five-month falling wedge (reversal pattern, white), while the alt has been on a sharp downward trend. Furthermore, it lost more than 44% of its value in just three days when it hit a nine-month low on Jan. 22. Consequently, it formed a bearish flag as it flipped the vital USD 1.2 mark from support to resistance.
It becomes crucial to note that the support at the USD 1.12 level has stood as a test floor for more than 11 months. As a result, the bulls have exerted pressure for the past two weeks to regain the USD 1.2 level. But they still struggled to topple the 20 EMA.
Now the $1,123 mark is becoming a critical point for the buyers to step in to avoid further pullback. But any close below the immediate support would propel a test of the $1.01 mark support before a possible reversal of the falling wedge pattern. Should the bears shrink, the bulls could attempt to recover the USD 1.2 mark. But that would most likely be short lived until the bulls ramp up trend-changing volumes.
While the RSI is in an uptrend, it still needs to topple its centerline on the daily chart to confirm a bullish edge. Now one has to watch out for a break outside the existing flag range to ensure a prudent trade call/short.
The CMF plunged steeply below the zero line, indicating a bearish bias in the near term. Nevertheless, at the time of writing, the alt revealed readings of its ADX (directional trend).
While the indicators are showing mixed signs, the bulls are still missing volumes to counter the broader downtrend. So a potential retest of the $1.01 or $0.8 mark before a strong reversal should come as no surprise.
Still, traders/investors should keep a close eye on Bitcoin’s movement, as ADA shares a 76% 30-day correlation with the king’s coin. Furthermore, they should also watch out for the on-chain metrics that affect the current and potential perception of ADA’s value.
This post Cardano: Estimating the Probability of a Turnaround
was published first on https://ambcrypto.com/cardano-assessing-the-odds-of-a-reversal-ahead/