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Analysis

Cardano traders could long the alt here

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Source: Pixabay

After surging by over 25% in the last five days, Cardano prices looked to take a breather as sellers returned to the market. Triggered by BTC’s decline below $37,000, ADA prices moved south and eyed key developments to initiate its next leg upwards. At the time of writing, ADA traded at $1.25, down by 9% over the last 24 hours.

Cardano Hourly Chart 

Source: ADA/USD, TradingView

Yesterday’s rise saw ADA break north of its ascending channel and trade above its 38.2% Fibonacci Extension level ($1.31) for the first time in 15 days. However, buying pressure eased before ADA snapped the $1.40 mark and a correction soon followed which dropped prices towards the lower trendline of their pattern.

The last few hours did result in a series of green candles and there was a chance that ADA would extend its gains over the coming sessions. In such a case, ADA bulls would eye a push towards the $1.31-$1.35. However, a close above $1.28-resistance and 20-SMA (red) was needed to validate such an outcome. This area also clashed with the half-line of ADA’s pattern.

Reasoning 

Relative Strength Index saw a bounce back from the oversold zone as some buying pressure returned to the market. The Directional Movement Index’s +DI inched closer to the -DI and a bullish crossover would indicate the onset of another uptrend. Squeeze Momentum Indicator noted receding bearish momentum and a buy signal can be placed once the index closes above the equilibrium-mark.

Conclusion 

Since the above mentioned indicators were yet to fully back a bullish trend, it seemed rather premature to call for an immediate reversal in prices. Traders could choose to forego some gains by longing ADA only once it closes above $1.283 as this would heighten chances of a swing to the upside. In this scenario, take-profits can be set between $1.31-1.35 which would highlight gains of 3%-5.5%.

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A business graduate with a keen interest in emerging markets across South East Asia. As a financial journalist, he covered stocks and market reports across Australia and New Zealand as well.