Cardano News: ADA Could Drop Below $0.600 Again as Bearish Pennant Pattern Pops Up

Trading volumes have surged by 25% in the past day as well and currently sit at $862 million, the majority of which (over 60%) comes from the futures market as traders appear to be positioning themselves for a significant move.

Data from DeFi Llama shows that Cardano DEX trading volumes closed February at nearly $150 million, meaning a 13.3% drop compared to the same period a year ago.

Meanwhile, the network’s 7-day SMA for daily active addresses has also experienced a decline, moving from around 38,100 to when the year started to 23,000 as of yesterday according to data from CoinMetrics.

Similarly, daily transactions have plunged from a 7-day SMA of 78,900 to 29,200, resulting in a 63% drop since the year started as well.

Despite these disappointing on-chain metrics, ADA is among the most resilient tokens this year with annual losses of 12.4% while rival smart contract platforms like Ethereum and Solana have seen their utility tokens drop by 38.9% and 30.4% respectively.

Bearish Pennant Pattern Pops Up in the Daily Chart

ADA has lagged behind its peers in the past 7 days, producing returns of just 1.6%. Comparatively, other tokens in the top 5 like Ethereum (ETH) and XRP (XRP) have seen higher gains of 9.2% and 15.5% respectively.

The token seems to have entered a period of consolidation as the market awaits a new catalyst to determine if there are merits to resume the early March sell-off or if this latest crash has already gone too far.

Sentiment is still heavily depressed as the Fear and Greed Index currently stands at 23, meaning that investors are still in fear. However, the indicator has picked up from its record-low level of 17 from last week.

The daily chart shows a bullish structure as ADA has made two consecutive higher lows in the past three weeks or so although it has rejected a move above $0.780 multiple times as well lately.

A symmetrical triangle confirms that the token has entered consolidation mode ahead of the Fed’s meeting.

As a result, a bearish flag pattern has emerged. This is a technical formation that precedes the continuation of the previous trend, meaning that the outlook for ADA is bearish on the daily chart unless this setup is invalidated by a move above the $0.800 level.

However, if ADA drops below any of the two key supports highlighted in the chart, it is highly likely that negative momentum will accelerate. Hence, today’s meeting will be critical to set the market’s tone and sentiment for the next few weeks.

ADA Offers Attractive RR Ratio After a Clean Resistance Break

Heading to the lower time frames, the hourly chart shows that today’s rally has managed to break above the $0.730 level – an important threshold for bulls as the token’s downtrend has now been reversed.

Momentum indicators have been on an uptrend since the American session ended yesterday and the MACD is showing steadily increasing positive momentum readings. The American session has been supportive of this bullish trend for now.

At current levels, a long position offers an attractive risk-reward ratio of 1.8 if the stop price is set below the $0.730 level and the target at $0.761.

There’s a mid-level higher low in the way for ADA to reach this higher exit price so traders should keep an eye on how the price action behaves once the price reaches that level. It has already been rejected once so a second rejection could put this uptrend in full reverse mode.