Be Careful Of Cardano’s (ADA) Bounce
I am a huge Cardano bull. Full disclosure, it makes up the largest percentage of my cryptocurrency holdings. But even though I am a long term hodler and bull, I am a trader and I see dangers to the today’s rally. The entire cryptocurrency market is down – the total market cap is lower and the altcoin market cap is lower as well. I referenced this a little during today’s cryptocurrency video, but I want to expand on it more in this article.
Cardano (ADA) Weekly Ichimoku Chart
Above: Cardano (ADAUSD) Weekly Chart
The weekly chart above shows two important head and shoulder patterns. The first head and shoulder pattern appears on the Composite Index (top most pattern) and we have a clear break of the CI’s close (red average) below the neckline of the head and shoulder pattern. To add to this bearish event, the CI has crossed below the faster average (green average). This is a strong, leading bearish indicator. The head and shoulder pattern on the %B (bottom most pattern) shows the same break of the neckline. The %B’s condition is one that we need to pay the most attention to. The CI crossing below its fast average and the neckline of its head and shoulder pattern is a powerfully bearish event – but the triggering event to consider a short is not when the %B crossed below the neckline, but when it crosses below the 0.8 level (which it is currently above). Watch for this to occur before the open of next week’s candlestick on Monday.
Cardano (ADA) Daily Ichimoku Chart
Above: Cardano (ADAUSD) Daily Chart
The daily chart shows Cardano has had some significant testing and pressure against the Tenkan-Sen and the Kijun-Sen. Traders have pushed Cardano below the daily Kijun-Sen earlier in the trading session, creating the current daily low. This is the first time that Cardano has tested a break of the daily Kjiun-Sen since January 22nd. But look at the RSI (#1). I’ve created a thick, red-dotted line to display the 55 level on the RSI. This is the final oversold support level on the RSI. If it breaks below 55, then Cardano has officially transitioned into a neutral condition on the daily chart. I would normally be looking for a good buying opportunity, but There is no divergence present between the RSI and the Composite Index. The trigger for considering a short here is when Cardano has a close below the Kijun-Sen, the RSI moves below 55 and, finally, when the %B retests the 0.8 level as resistance and we get confirmed rejection against the 0.8 level. I am a buyer if we can dip back into the $0.80 or $0.90 value areas. But watch out for limited moves lower. There are some big players now in the cryptocurrency space. Market Strategies just bought $10 million of Bitcoin with cash at the $48k value area ARK Investet’s Cathy Wood continues to remain bullish and acquire Bitcoin in her spectacularly performing fund.