Cardano (ADA), one of the prominent cryptocurrencies in the market, has recently witnessed a bullish breakout from both long- and short-term diagonal resistances. This breakout seemed to signal the beginning of a new bullish trend. However, while short-term indicators support this uptrend, long-term readings remain undecided, leaving the market uncertain about the potential trend reversal.
Cardano’s Attempt to Sustain the Uptrend
An in-depth technical analysis of ADA on the weekly timeframe reveals that in early January, the cryptocurrency broke out from a descending resistance line that had constrained it for over a year. This breakout was expected to trigger a substantial upward movement.
Contrary to initial predictions, the ADA price experienced retracements, twice returning to the descending resistance line after the breakout (green icons). Such price action is not uncommon following breakouts, and it often signifies buying pressure. Notably, the second return resulted in a new yearly low but also displayed a significant long lower wick, indicating potential bullish sentiment. As a result, the ADA price started an upward trajectory.
The Role of Relative Strength Index (RSI)
The weekly Relative Strength Index (RSI) plays a crucial role in assessing market momentum. It helps traders determine if an asset is overbought or oversold, aiding in making informed decisions about buying or selling. A reading above 50 on the RSI suggests that bulls still hold the advantage and that an upward trend is likely. Conversely, a reading below 50 indicates the opposite. Presently, despite witnessing an increase in the RSI, the indicator remains below 50, implying uncertainty in the current trend.
ADA Price Prediction: Is the Breakout Genuine?
Focusing on the daily timeframe price action provides a more positive outlook for Cardano’s price. Several factors support this optimistic view. Firstly, ADA successfully broke out from a short-term descending resistance line, which had been in place since April 13. Such a decisive bullish signal indicates potential further gains. Moreover, the price managed to reclaim the crucial $0.30 area, particularly after a failed breakdown, which confirms the significance of the resistance line breakout. Although the price experienced a temporary dip after the breakout, it managed to validate the resistance line and the $0.30 area as strong support before rebounding (green icon). Additionally, the daily RSI currently stands above 50 and continues its upward trajectory, suggesting an ongoing bullish momentum.
The Caveat: Monitoring the $0.30 Support Area
Despite the positive outlook, it is essential to keep a close eye on the $0.30 horizontal support area. A daily close below this level would invalidate the bullish hypothesis, raising the possibility of a decline towards $0.25.
Read More: BlackRock’s Appointment of Former Oil Executive Sparks ESG Controversy
Conclusion
Cardano’s recent breakout from both long- and short-term resistances indicates the initiation of a new bullish trend. Short-term indicators support this upward movement, but the long-term outlook remains uncertain until the RSI confirms a definitive trend. Traders and investors must closely monitor the price action around the critical $0.30 support level to gauge the sustainability of the bullish momentum. As always, exercising caution and implementing appropriate risk management strategies is crucial in cryptocurrency investments.
