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3 Cardano Indicators Showing 35% ADA Crash Potential by December

By:
Yashu Gola
Published: Nov 20, 2024, 18:30 GMT+00:00

Key Points:

  • Cardano (ADA) risks a 35-40% correction as a bearish rising wedge pattern points to weakening momentum.
  • Bearish RSI divergence and long-term resistance at $0.90 further support the possibility of a major ADA price reversal.
  • While Trump’s re-election may boost ADA’s long-term fundamentals, short-term technicals indicate downside risks.
Cardano price prediction

In this article:

Cardano (ADA) has surged 140% in November, riding a wave of optimism fueled by Donald Trump’s re-election as U.S. president. Investors are betting on lighter crypto regulations under his administration, boosting demand for ADA. However, key technical indicators suggest the rally may be unsustainable, with a potential 35-40% price correction on the horizon.

Bearish Rising Wedge Pattern Signals Weakening Momentum

A classic rising wedge pattern is emerging on ADA’s four-hour chart. This bearish technical setup, defined by converging upward trendlines, typically signals a trend reversal.

ADA/USD four-hour price chart
ADA/USD four-hour price chart. Source: TradingView

If ADA breaks below the wedge’s lower trendline, the projected breakdown target could range between $0.598 and $0.513. The latter aligns with the 200-4H exponential moving average (EMA), reinforcing it as a critical support level.

Notably, declining trading volumes during ADA’s recent uptrend further strengthened the bearish case, as lower volumes typically indicate reduced buyer interest and rally fatigue.

Bearish RSI Divergence Suggests Weakening Buying Pressure

Another red flag is the growing divergence between ADA’s price and Relative Strength Index (RSI). While ADA’s price has continued to rise, its RSI has declined, forming a bearish divergence that suggests weakening buying pressure.

ADA/USD four-hour price chart
ADA/USD four-hour price chart. Source: TradingView

The four-hour RSI sits at 68, just below the overbought threshold of 70.

ADA has historically faced significant corrections whenever its RSI approached or crossed overbought territory. This suggests the current rally is overextended and could reverse soon, in line with the bearish rising wedge setup.

Long-Term Resistance at $0.90 Could Trigger a Major Sell-Off

ADA’s weekly chart adds to the bearish outlook, with the $0.90 level emerging as a strong resistance zone. This level aligns with the 0.236 Fibonacci retracement trendline and has acted as a major distribution point in the past.

ADA/USD weekly price chart
ADA/USD weekly price chart. Source: TradingView

For instance, ADA faced corrections of 65%-75% after testing this resistance in April 2022 and March 2024. If the same pattern repeats, ADA could drop toward $0.476, which aligns with its 200-week EMA and a descending resistance-turned-support trendline.

Adding to the bearish narrative, ADA’s weekly RSI is now seven points above the overbought threshold of 70, suggesting that a long-term correction may already be underway.

Upside Risks: What Could Invalidate the Bearish Outlook?

While the bearish signals are strong, ADA could invalidate this outlook with a decisive breakout above the rising wedge’s upper trendline, accompanied by strong trading volume. This could pave the way for a rally toward $0.90, though the $0.90 resistance remains a significant barrier.

Fundamentally, Trump’s re-election could support ADA’s long-term prospects by easing regulatory pressure on cryptocurrencies in the U.S. However, these potential benefits are unlikely to materialize in the short term, leaving ADA vulnerable to immediate technical risks.

About the Author

Yashu Gola is a journalist focusing on cryptocurrency markets since 2014. He writes for Cointelegraph and CoinChapter and has previously served as the chief editor for NewsBTC.

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