A bullish breakout for Cardano – How likely is it?

Disclaimer: The findings of the following analysis are the sole opinions of the writer and should not be taken as investment advice

Cardano has failed to breach the $1.88-resistance since 19 May and its latest unsuccessful breakout attempt in early June resulted in another 50% decline. A single candlewick dropped all the way towards $1 and even though the alt’s prices have picked up over the past few days, ADA’s movement remained within its down-channel.

At the time of writing, Cardano held the fifth spot on CoinMarketCap’s charts and was being traded at $1.31, down by 1.3% over the last 24 hours.

Cardano daily chart

Source: ADA/USD, TradingView

A look at ADA’s daily chart showed that recent losses dropped ADA back towards its 200-SMA (green) for the first time since late-February. The longer term moving average was able to trigger a 20% jump, but bulls were not in the clear just yet. The upper trendline of ADA’s down-channel clashed with two important areas – The 20-SMA (red) and the $1.42-resistance.

Failing to close above these levels could result in a retracement between $1.25-1.15 before its next upcycle.

Reasoning

The Awesome Oscillator noted a series of rising red bars even though ADA rose north over the past few days. This bearish divergence could come into play if ADA fails to hike above $1.42 in the coming hours. The Relative Strength Index did recover from the bearish territory, but was kept modest by the upper sloping trendline.

The only positive came in the form of the MACD after the index closed in on a bullish crossover. However, stronger cues are needed for a breakout from the pattern.

The focus should be on $1.25-1.15 over the coming days. The Visible Range noted high interest for ADA between these levels and the same would likely be maintained by the bulls. If the bears dominate moving forward, ADA could head back towards its psychological level of $1 and its 200-SMA.

Conclusion 

Bullish momentum seemed weak in the market to support a breakout from ADA’s down-channel. Instead, the price can be expected to oscillate between $1.25-1.15 over the next few days. Chances of a sharper sell-off till $1 cannot be discounted considering heavy selling pressure in the broader market.