Disclaimer: The findings of the following analysis are the sole opinions of the writer and should not be taken as investment advice
While some altcoins have been quite volatile over the week due to Bitcoin’s hike above $42,000 and its subsequent retracement, the same cannot be said for Cardano.
Broader market cues did not seem to have a drastic effect on ADA’s price as it remained gridlocked between the strong resistance of $1.38-$1.40 and support at $1.25. However, tracking its movement since 19 May highlighted the formation of a pennant and a potential swing could be in store over the coming week. The question is – In which direction?
Cardano Daily Chart
Source: ADA/USD, TradingView
Since the 19 May sell-off, Cardano has formed four higher lows at $1.95, $1.86, $1.49, and $1.38. An upper sloping trendline was used to plot these points on the charts. Similarly, a lower trendline was plotted along the slightly higher lows of $0.95, $1.0, and $1.02.
This created a pennant pattern which indicated two possible outcomes going forward.
Let’s discuss a bullish outcome first since this seemed achievable with one simple development. Buyers need to target a hike above the $1.38-$1.40 resistance – A result that could trigger a near 40% surge in value towards the highest point in ADA’s pattern at $1.88. Excited? Well, it wouldn’t be that plain and simple.
This scenario would require ADA to close above its weekly 20-SMA (red) (not shown) which has run bearish since 5 July. Moreover, the Visible Range noted a decent number of sellers at ADA’s aforementioned resistance zone.
Quite a few developments need to take place for this result. For starters, ADA would need to drop below its daily 200-SMA (green) and Visible Range’s POC at $1.21. Ideally, ADA would find support at the higher low at $1.05, but a close below this level might lead to a sharp sell-off in the market. The 23 April swing low of $0.92 would be in focus in such a situation.
At press time, the buyers were at an advantage. The RSI was above 60 – A sign of bullish strength in the market. The Squeeze Momentum Indicator noted upwards pressure, while the MACD maintained its northbound trajectory, albeit with some choppy movement. However, the indicators had not yet matured to levels to indicate a clear winner in this battle.
ADA did flash positive signals as it traded close to the resistance zone of $1.38-$1.40. Traders should be on the lookout for a break above or below key levels to ascertain ADA’s next destination over the coming weeks.