Cardano Tests Critical Support as TD Buy Signal Emerges at $0.378
Market Pulse
- ADA has continued to fall for the seven days in a row.
- It has lost 13% in the last two weeks and 25% in the past month.
- Cardano’s native cryptocurrency trades at levels not seen since early December last year.
ADA bulls, however, continue to believe the long-term uptrend remains intact bar an element of patience.
The recent blood in the streets has caused substantial daily losses in both USD and BTC prices, but it’s also driven an enormous decline in futures leverage and increased funding rates. The open interest for ADA futures fell 28% over the past two weeks to roughly $530 million. This indicates that the recent long liquidations made up a significant portion of the ADA derivative market as those longs rushed to close out over-leveraged trades. rest of the ADA derivative market as those longs scrambled to close out over-leveraged trades.
| Metric | Value |
|---|---|
| Asset | CARDANO (ADA) |
| Current Price | $0.38 |
| Weekly Performance | -12.50% |
| Monthly Performance | -24.85% |
| RSI (Relative Strength Index) | 35.3 |
| ADX (Average Directional Index) | 33.3 |
| MACD (MACD Level) | -0.02 |
| CCI (Commodity Channel Index, 20-period) | -168.75 |
RSI at 35.32 Triggers First Oversold Reading Since Summer Capitulation
The relative strength index (RSI) is an indicator used in technical analysis to measure the momentum of recent price changes. It gives us an easy-to-interpret 0-100 range showing where the price currently sits in the context of recent price movements. An RSI above 70 is generally considered to be in overbought territory meaning a correction might be expected soon, while an RSI below 30 is generally considered to be in oversold territory meaning a rebound might be expected soon.
What is interesting is the recent behavior of the RSI. It printed a higher low at 35.32 versus the reading of 32.54 in December while price was printing a new low. This bullish divergence, coupled with the return of positive funding across the board in the altcoin markets, could indicate that sellers are running out of fuel at these levels. Therefore, for swing traders, this oversold bounce setup has worked in the past, but to confirm a new uptrend XLM will have to rise above the $0.42 resistance zone, where the 20-day EMA is also located.
ADX at 33.28 Confirms Strong Downtrend – But Momentum Shows Signs of Exhaustion
In terms of trend strength, the ADX reads 33.28 so bears clearly had the upper hand in December. This reading shows that we have a real trending environment rather than a choppy consolidative one – which is the type of environment where oversold bounces can be quite sharp and violent when they do come.
Importantly, the ADX has begun to decline from its 38.65 weekly high, meaning the bearish trend is potentially losing power now that price has reached significant support. This means that while the ADX shows we have had a very strong bearish trend, the recent slow-down combined with several buy indicators present a perfect environment for at least a relief rally. As we’ve noted, day traders will experience heightened volatility as the market shifts from one that’s been trending to one that could be trading in a range between $0.35 and $0.42.
20-Day EMA at $0.423 Becomes First Major Resistance After Month-Long Decline
The broader sell-off has caused the ribbon structure to constrict and trend steeper to the downside. With the 100-day EMA next in line ($0.292), a clearly defined level and guide for the bulls to defend will be tested soon should downside momentum continue to play out. For the ADA bulls to regather some form and price structure, a clean break on strong volume above the 50-day EMA will be the first crucial step.
If we zoom in closer for near-term price targets, resistance begins with last week’s tight consolidation range between $0.479 and $0.492. Inside that, today’s high at $0.469 has already been rejected. It struggled to break through in early December, acting as support in mid-December and resistance in early January.
Support Stacks at $0.35 While Resistance Clusters Between $0.42-$0.50
The nearest support zone, ranging from $0.350 to $0.378 has stood the test six times over since early June. The level is even more crucial given its confluent technical nature, as it coincides with the 0.786 Fibonacci retracement level of the 2022 uptrend, and is a high-volume node from the consolidation the market underwent last year. TD buy setups began to form at this precise zone, as funding rates turned positive, indicating that retracement traders and larger institutional players might be filling their bags.
There are resistance clusters forming between $0.42 and $0.50, with the 20-day EMA ($0.423) acting as the first major hurdle and the psychological $0.50 level serving as the next one, which previously prevented the rally from continuing in December. The monthly pivot at $0.478 and the 50-day EMA at $0.487 reinforce this resistance band. This range is further supported by volume profiling as there are a notable number of traders who purchased in and around these levels.
The market structure indicates a potential bottoming pattern provided bulls hold the $0.35-$0.378 support zone upon retest. The combination of technical buy indicators, favorable funding rates, and consistent exchange outflows presents an asymmetric risk/reward opportunity for bottom fishers – with confirmation coming upon the regaining of at least the 20-day EMA for any reversal conviction.
Bulls Need $0.42 Reclaim to Validate Bottom as Buy Signals Stack Up
Buyers need to push the price above $0.423 on a daily basis to turn the 20-day EMA into support and to test the psychological level around $0.50. The $0.54 target of the TD buy setup is still valid and if we manage to get three daily closes above $0.42, it will become highly probable. Positive funding and the low outflows from exchanges indicate that the price is likely to go up.
If the price of the asset does not maintain the $0.35 support for the end of the day, it will probably fall to $0.30, or even as low as $0.24 during the 2023 bear market lows. Buyers who came in on the TD buy signal will be trapped if the breakout occurs and derivative positions will be liquidated as the current funding is long.
It is likely that investors are waiting for the broader market to finally shift focus from Bitcoin and the major DeFi assets to the large and mid-cap altcoins like ADA, which are in a critical multi-year confluence support, Hansen wrote. projectName.96 James at the Market Ear also holds a similar view, arguing that ADA is about to get propelled by the gravitational pull stemming from Bitcoin and Ethereum once the pump spills over from the enterprise-level cryptocurrencies.
