Cardano inflicts bearish breakout – Are more shorting gains likely?

Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion

• ADA inflicted a bearish breakout. 
• The open interest rate dropped in the past few days. 

Like the other altcoins, Cardano [ADA] retraced following Bitcoin’s [BTC] correction. ADA plunged by 12%, dropping from $0.4620 to $0.3804.

However, the price action seemed to steady above the $0.3804 support level, at the time of writing. 

Read Cardano [ADA] Price Prediction 2023-24

However, interest rate fears loom as Fed watchers wait for the 2-3 May FOMC meeting. U.S. stock equities sank lower end of last week (21 April) amidst increasing macroeconomic headwinds, exerting downward pressure on the crypto market.

ADA could breach lower supports if the trend persists and BTC drops below $27k. 

Will $0.3504 hold?

Source: ADA/USDT on TradingView

ADA inflicted a bearish breakout from its ascending channel on 20 April, extending its drop after rejection at the $0.4620 price ceiling. At press time, ADA wavered near the dynamic 50-EMA (0.3865) support. 

The RSI on the daily chart retreated from the overbought zone and faced rejection below the 50-mark. It shows buying pressure dropped, but bulls were fighting to regain control. But the declining ADX (Average Directional Index) suggests a likely consolidation or further downtrend. 

If it’s the former, ADA could oscillate between the $0.3804 – $0.4056 range. But if it’s the latter, ADA could drop to $0.3581 or the dynamic 200-MA ($0.3516) support.

A breach below the 200-MA could expose ADA to even more aggressive selling, dropping it to March lows of $0.3015.

As such, the above scenario could offer shorting opportunities with targets at $0.3581 and $0.3015. Notably, the $0.3015 target could offer the best risk reward but could be easily invalidated by a bullish BTC. 

A close above $0.4056 will invalidate the above bearish thesis. Such an upswing could push ADA back to the ascending channel. 

The open interest rate dropped

Source: Coinglass

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ADA’s open interest (OI) rates peaked around mid-April but declined afterward. The OI was slightly above $180M at press time, compared to over $240M in mid-April. It shows a decline in demand for ADA – a bearish sentiment that could favor sellers. 

In addition, the exchange long/short ratio on the 12-hour timeframe showed sellers had little advantage over bulls – reiterating a moderately bearish outlook for the asset in the mid/long term. But a bullish BTC could reverse this trend and is worth tracking before making moves. 

Source: Coinglass