The outlook for Cardano is bearish both on a long term and a short term basis. As explained in the previous article, there is a drop coming for Cardano and other altcoins; as for ADA, the drop might push it down to the 0.382-Fibonacci level.
At press time, ADA was trading at $0.1079 and was the tenth-largest crypto by market cap as seen on CoinGecko. The coin does have the potential to surge, however, due to its larger correlation with bitcoin, it might not.
Cardano 1-hour chart
Source: ADAUSD TradingView
The one-hour chart, as explained above, is bearish for Cardano. The bearishness will be explained in a step-by-step process starting from patterns. Cardano is stuck in a bearish pattern – rising wedge. If altered we can find ADA in a bearish pennant. As the name indicates, both of which are bearish in nature.
Hence, shorting here would be the best thing to do.
Rationale
The first rationale is the pattern, which is inherently bearish. Following this, we have two indicators, OBV [on balance volume] and RSI [relative strength index], which help our case.
Clearly, there is a bearish divergence between the price and the RSI, which shows that the recent surge in price isn’t matching the momentum seen on the RSI. Hence, we can expect a short term drop in price.
The OBV indicator, however, isn’t complying with this bearishness, in fact, it shows a volume surge along with the price.
Levels to lookout
Before actually going into the entry, exit, and stop-loss, let’s take a look at the important levels. Starting from the 0.236-Fibonacci level aka $0.1054; this level will hinder the drop of ADA. Hence, care should be taken if the price starts to rebound from this level.
However, if there is a clear break below this level, then we can expect ADA to complete the short position mentioned below.
Entry: $0.1084
Stop-loss: $0.1105
Take-profit: $0.1018