ADA Breakout Imminent, But Is It Lower Or Higher?
– Cardano, like every cryptocurrency, is tied to Bitcoin’s overall sentiment and price action.
– Consolidation is a sign of continuation.
Cardano’s Daily Chart
Spend any time on the various groups in social media dedicated to Cardano (and I would advise you to never, ever do that). You’ll undoubtedly see many amateurs and new traders/investors voicing complaints that Cardano hasn’t moved much. Everyone wants to see ‘major gainz’ and ‘rocket ships’ every day – but that’s not how investing works. Yes, there are times when you see double-digit percentage gains, but two scenarios usually follow those:
Sell-offs are exciting because they are violent and awful. Oddly, people prefer to see sell-offs than consolidation. Why? Because consolidation is like torture. Will it move higher? Will it move lower? Indecision kills the emotional highs and lows associated with spikes and crashes. But consolidation is healthy. Consolidation that occurs after a trending move is a sign of strength of the prior trend and is almost always a precursor to a resumption of the preceding trend.
On Cardano’s chart up above, we can see that Cardano is now in its thirteenth consecutive day of trading around the 1.1214 value area. The price range has been bound between two key Ichimoku levels: highs have been limited by the Tenkan-Sen above, and the lows have been limited by the Kijun-Sen below. And the gap between the Tenkan-Sen and Kijun-Sen is getting more constricted every day. The question is this then: when will Cardano break out? A standard indicator used to detect the end of consolidation is a volatility indicator known as Bollinger Bands (created by John Bollinger). I don’t like many overlays on my charts, so I opt to use John Bollinger’s %B oscillator instead (#3). If we had the Bollinger Bands on the chart, we would see a Bollinger Squeeze condition. This means pressure is building, and a big move is coming.
The Ichimoku system has its own type of Bollinger Squeeze, represented by the Chikou Span (#1). A warning of consolidation is when the Chikou Span gets close to the candlesticks, and confirmation of imminent consolidation is when the Chikou Span is trading ‘inside’ the candlesticks. Cardano’s Chikou Span, at its present value, will enter consolidation in five days. This can be prevented by the Chikou Span trading above the candlesticks. One of the strongest confirmations of a continuing trend (for bulls) is when the Chikou Span is trading above the candlesticks and has no other Ichimoku resistance above it. Technically, Cardano’s chart is still extremely bullish.
The signal I am waiting to signal a resumption of the bullish trend is a combination of conditions on the Composite Index (#2) and the %B (#3). The Composite Index is currently sitting at a historical support level. When the Composite Index (red line) crosses above its fast average (green moving average), and the %B has crossed above 0.8 – that will create the condition for me to add to my longs slightly above the consolidation price range as a confirmation of a new bullish trend.