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24h Market Cap Change $-0.42

Cardano: Risky to enter short positions until ADA drops beneath this level

2min Read
Cardano slips beneath a local supply zone, but this demand region could see yet another bounce

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

Bitcoin saw a huge bounce in recent hours. It dropped to $18.8k a few hours prior to the time of writing. Within the space of four hours of this dip, it bounced upward by nearly 10% to trade at $20.8k for a brief moment. This bounce was exhausted and sellers were quick to capitalize. Cardano also saw a bounce from the six-week range lows at $0.44. However, at press time, it looked to be headed lower once more.

ADA- 1 Hour Chart

Cardano slips beneath a local supply zone, but this demand region could see yet another bounce

Source: ADA/USDT on TradingView

The range in question had its low at $0.44 and high at $0.64, and the mid-range value at $0.54. It was plotted in yellow, and the $0.42-$0.44 region has acted as a strong demand zone in the past month and a half.

It can be expected that it will continue to act as a support zone. There was support for ADA all the way down to $0.4. Hence, until ADA dropped below this level, traders should be wary of a reversal upward.

At the same time, the weakness of ADA on the charts was quite apparent. The $0.47-$0.475 region was ceded to the bears after holding out for a few days this week. The rally from a few hours ago retested this area as resistance, and a move lower appeared likely.

Rationale

Cardano slips beneath a local supply zone, but this demand region could see yet another bounce

Source: ADA/USDT on TradingView

On the price chart, the 21-period moving average (orange) had crossed over below the 55-period moving average (green) to signal bearish momentum. The RSI was also below the neutral 50 line. Its attempt to push higher was firmly rejected. Therefore, the short-term trend was shown to be bearish by both the price action and the indicators.

The OBV had two levels of support to the south. Until these levels are breached, it would remain likely that ADA can see a bounce back toward the $0.47-$0.5 area.

Conclusion

While the momentum was bearish for Cardano, there was a resilient zone of demand for ADA, up to the $0.4 area. Until the price dropped beneath this level, and the OBV also dropped below the two supports highlighted, it could be risky to enter short positions on ADA.

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Akashnath Sumukar works as a Senior Journalist at AMBCrypto. Based in Chennai, India, he has been an avid follower of the cryptocurrency market since Bitcoin’s boom and bust cycle of 2017. A graduate in Chemical Engineering, he is an expert in technical analysis. In fact, Akashnath has a particular interest in reading price charts and predicting how an asset will move over the short and long term. A self-taught trader and as someone who holds cryptos himself, he is always on the lookout for the next opportunity he can possibly capitalize on, while also educating his audience.
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