Will Cardano (ADA) Price Rebound After Bearish Weekly Candlestick?

8 months ago 21

ARTICLE AD BOX

Cardano’s (ADA) price broke out from a long-term horizontal resistance area but failed to sustain the increase and returned to the area again.

Whether the price validates the area as support and bounces or breaks down instead will be key in determining the future trend. Which is more likely to happen?

Cardano Returns to Breakout Level

The technical analysis of the weekly time frame shows the Cardano price finally closed above a long-term horizontal resistance area two weeks ago. Before doing so, the ADA price had made five unsuccessful breakout attempts (red icons), leading to long upper wicks. These are considered signs of selling pressure.

After the breakout, the Cardano price created a bearish candlestick last week. This week, it returned to the horizontal area, possibly validating it as support.

While the ADA price action is still bullish, the RSI readings are bearish. The RSI is a momentum indicator traders use to evaluate whether a market is overbought or oversold and whether to accumulate or sell an asset.

Readings above 50 and an upward trend suggest that bulls still have an advantage. Readings below 50 indicate the opposite. The RSI generated bearish divergence during the breakout, which precedes downward movements. Even though the indicator is falling, it is still above 50.

ADA Price Prediction: Can Breakout be Sustained?

The daily time frame price action aligns with the weekly one. It shows that the ADA price broke out from a descending resistance line on February 8, reaching a high of $0.64 on February 20. While the price has fallen since, it still trades inside horizontal support at $0.58.

Also, the daily time frame wave count predicts the upward movement will continue. Technical analysts employ the Elliott Wave theory to identify recurring long-term price patterns and investor psychology, which helps them determine the direction of a trend. The most likely count indicates ADA is in the fifth and final wave of an upward movement.

If the count is correct, the ADA price will likely increase by another 40% and reach the next resistance at $0.82, completing wave five. Afterward, a correction will be expected.

Despite the bullish ADA price prediction, closing below $0.58 will deepen the short-term correction. Then, the ADA price could fall by another 10% to the next closest support at $0.52. It is worth mentioning that this will not invalidate the long-term bullish count but will only delay the wave five increase.