Cardano (ADA) formed a deadly “death cross” on its daily chart against Bitcoin (BTC) – a market signal that is generally seen as a warning of a short-term decline.
The ominous headline indicator is triggered when an asset’s short-term moving average closes below its long-term moving average. In doing so, he calls on technically minded traders to increase their bearish positions in the market.
ADA / BTC in trouble
On Tuesday, ADA’s 50-day exponential moving average (50-day EMA; the velvet wave) fell below its 100-day exponential moving average (100-day EMA; the blue wave). This marked the sixth bearish EMA 50-100 crossover on the daily ADA / BTC chart, raising fears of further declines to come.
This is in part due to the ADA’s earlier reactions to the prices of death crosses. For example, in September 2020, the price of Cardano token fell almost 38.50% against Bitcoin after painting a bearish cross of 50-100 EMA.
Likewise, a cross pattern of death on May 12, 2019 subsequently saw a price drop of 62.50%.
However, the likelihood of immediate liquidation remains relatively low. This is mainly due to the daily Relative Strength Index (RSI) of the ADA, which alerted the token’s status against Bitcoin as being oversold, with a reading below 30. Traders generally view an over-sold RSI as their signal to enter the market.
For example, in May 2019, the formation of the Death Cross coincided with the RSI dropping below 30. Later, the price rebounded over 30% to retest the 50 and 100 day EMA waves as that resistance, underscoring the intention of traders to buy oversold. cryptos.
Applying the same fractal to the current price action, we can expect ADA / BTC rates to rebound, especially as they fall to their two-month low of 0.00003372 BTC to drop for retest a five month old support zone defined by 0.00003192-0.00003075 BTC (the red bar in the first chart above).
This inverted cup and handle
A weakening in the ADA / BTC rate simply reflects Cardano’s clumsy performance against the US dollar in recent sessions against Bitcoin, which has risen sharply against the greenback during the same period.
For example, Bitcoin’s monthly gains against the dollar are around 43%. By comparison, the price of Cardano has fallen by more than 6% over the same period.
But one would expect further weakness, with a reverse cut and grip pattern taking shape on its dollar-quoted charts.
In detail, inverted cup and handle patterns appear when the price forms a large crescent shape followed by a modest upward retracement.
Analysts see them as bearish reversal indicators as they tend to push the price down to the maximum distance between the top of the Cup and the lower level of its right hand if the price breaks below the support of the configuration.
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Recent ADA price action matches the reverse description of the cut and the grip, with the price now looking to break through the structure’s resistance line at near $ 1.97. As a result, the target price on the downside is the area of $ 0.772 to $ 0.820 if Cardano confirms a bearish breakout.
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