Since striking its ATH on 2 September, Cardano (ADA) initiated its downtrend and practically swayed below its 20-50 EMA. The decline proved to be rather menacing for the bulls as they failed to defend the $1-mark.
A close above the $0.9-mark would position ADA for a possible retest of its Point of Control (POC). Post which, it could face a pullback from near the $1.1-zone and traverse back into its long-term trend. The seventh-largest crypto most likely positioned itself to reclaim the vital $1-support (now resistance). At press time, it traded at $0.888, down by 1.2% in the last 24 hours.
ADA Daily Chart
Since its ATH, ADA has formed a six-month-long descending channel (reversal pattern, yellow) while the alt was on a steep downtrend. Furthermore, it lost over 40% of its value from 10 February after forming a bearish flag and pole on its daily chart.
As a result, it gravitated towards its 9-month low on 24 February while the buyers stepped in to defend the $0.82-level. It becomes vital to note that this level of support has stood as a testing floor for nearly a year. As a result, for the past two days, the bulls have been exerting pressure and rejecting lower prices.
From here on, assuming the bulls are keen on maintaining the $0.82-mark intact, the alt eyed at a 20 EMA retest followed by reclaiming the $1-support. Historically, ADA has picked itself up from the lower trendline of the down-channel and tested its 50 EMA before conforming to the downtrend. However, the next few candlesticks would confirm whether the history would repeat itself or not.
Rationale
Source: TradingView, ADA/USDT
The bearish RSI showed an expected revival from its oversold mark. Any close above the 38-mark would likely cause a retest at the 44-point hurdle. A recovery towards the midline seemed conceivable in the days to come as the bulls endeavored to topple these barriers.
The DMI reaffirmed the heightened bearish influence. As the -DI approached its long-term peak, the chances of a recovery in the coming days are high.
Conclusion
While a trend reversal still might require exceptional efforts on the part of bulls, a test of its Point of control while finding a close above the 20 EMA seemed probable in the medium-long term. Even so, traders/investors should keep a close eye on Bitcoin’s movement as ADA shares a 71% 30-Day correlation with the king coin.
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