Technical Analysis and Market Entry: Cardano’s ADA Exposed to Strong Vulnerabilities South

  • Cardano’s ADA remains stuck within a stubborn downside trend, having failed to sustain a recent pullback.
  • The price has been falling for three consecutive months, having dropped as much as 60% within the noted period. 

ADA/USDT Recent Price Behavior 

Cardano’s ADA is back within the control of the market bears, following a period of stabilization that had initially been observed for September. ADA/USDT late in August hit the lowest price seen since March, as it struggles to escape a stubborn bearish trend. The price has been falling for the past three consecutive months, having dropped some 60% within this period. It is the worst monthly run of losses seen since August-November 2018.

 

ADA/USDT daily chart.

Critical Zone Breach and Retest

On 28 August, ADA breached a critical demand zone which runs from $0.05350 down to $0.04750. It is an area that has served as both supply and demand. The zone has proven its difficulty on both sides of the market. The price has since re-tested the territory, which is at the time of writing seeing sellers come into full force. It does leave the price open to some significant vulnerabilities to the downside, given the breakout and retest. 

The selling pressure had picked up much momentum for ADA/USDT, following a punishing breach of a long-running ascending trend line. It was supporting the bulls from the back-end of 2018. The bears, however, forced a breakout to the downside in July. The trend line was retested, and the bulls were hit with a harsh rejection. It led to ADA further tumbling, resulting in the bears maintaining the control. 

Weiss Ratings Downgrades Cardano 

Closely followed cryptocurrency rating agency Weiss Ratings recently downgraded Cardano from “C+” to “C”. Weiss noted that Cardano has a “D-“ in risk and reward, both rated “weak,” but it has “B+” in technology and adoption, rated “excellent” and “good,” respectively. ADA was previously sitting in the 5th spot, dropping in the ranking. 

Trade Recommendation

Given the earlier noted breakout and retest, ADA/USDT remains exposed to further downside pressure. The recent rejection has sparked another wave of selling; the price is now using a breached pennant structure as support. Should the pattern fail to hold the falling price, then another wave of trouble could come into play.

In terms of downside targets, the next major area of support is seen down at the 2018 low of $0.02800. It is where the price started its recovery in the latter stages of last year. ADA/USDT did manage to rally a whopping 290%, which was a bull run up until June, hitting $0.10680. Stops would be placed just above the current acting zone at $0.05650. 

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Author:
Ken has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.