The Cardano (ADA) price has encountered challenges in its recent attempts to surpass minor resistance levels, despite finding support above a crucial long-term horizontal level. Technical indicators suggest a short-term retracement followed by a potential higher low, paving the way for a potential upward movement. However, a closer analysis reveals bearish signals in the ADA price action and wave count, warranting a cautious outlook for the cryptocurrency.
ADA Finds Support After Failed Breakout:
On the weekly timeframe, Cardano experienced a breakout from a long-term descending resistance line in January. However, instead of a significant upward movement, the price retraced and twice returned to validate the previous resistance line as support. The most recent validation occurred in mid-June, coinciding with a bounce at the $0.25 horizontal support area, where ADA currently trades slightly above.
Undetermined Trend Indicated by RSI:
The weekly Relative Strength Index (RSI) provides an undetermined reading, which is significant for evaluating market conditions. The RSI, a momentum indicator, helps determine whether an asset is overbought or oversold and provides insights for traders. With the RSI still below 50 despite showing an increasing trend, the overall direction remains uncertain.
Wave Count and Price Action Point to Bearish Outlook:
Analyzing the daily timeframe, two bearish signs emerge for ADA. Firstly, the $0.30 horizontal resistance area has rejected the price, indicating a struggle to reclaim higher levels. Secondly, ADA is trading within an ascending parallel channel, typically associated with bearish patterns that often lead to breakdowns.
Furthermore, applying Elliott Wave theory to the price action reveals a negative outlook. The ADA price appears to be completing its fifth and final wave of a downward movement, potentially resulting in new lows. However, due to the extreme extension of the third wave, the fifth wave may end near $0.25, becoming truncated. This anticipated low aligns with the previously mentioned long-term horizontal support level.
Bullish Scenario Depends on Breaking Resistance:
Despite the bearish ADA price prediction, a close above the $0.30 resistance area would indicate a continued bullish trend. In such a scenario, the ADA price could quickly ascend to the next resistance level at $0.40.
Cardano’s ADA price faces challenges in reclaiming minor resistance levels, indicating a potential retracement in the short term. Technical indicators and wave count analysis suggest a bearish outlook, with the possibility of ADA reaching new lows near the crucial $0.25 support level. However, a decisive breakout above $0.30 would reestablish a bullish trend, potentially propelling ADA towards the $0.40 resistance level. Traders and investors should closely monitor these key levels and market developments to make informed decisions regarding ADA.