Technology

Cardano cuts most of its losses from the first quarter of the year

The price of Cardano (ADA) surged on March 25, putting itself on track to recoup a large portion of the losses it had suffered in the first two months of this year.

Cardano: still not that bullish?

ADA price soared around 7.5% in Friday trading, hitting $1.19 a month after bottoming around $0.75. The huge bounce move of the Cardano token accounted for around 60% gains. However, it remains at risk of losing its bullish momentum in the coming weeks.

At the core of this bearish analogy is a multi-month descending channel pattern, with a reliable history of simultaneously triggering and limiting ADA bounce attempts since September 2021..

The upper trend line of the channel has particularly served as an ideal selling zone, which is now being tested again as resistance.as shown in the graph below.

Daily price chart of the ADA/USD pair. Source: TradingView

ADA’s daily Relative Strength Index, now at 71.80, also warns of its “overbought” nature. In a perfect scenario, an RSI reading above 70 leads to selling in an attempt to neutralize the underlying asset’s overvaluation. This puts the Cardano token at risk of an imminent pullback towards the lower trendline of the descending channel.

More signs of a possible ADA pullback are seen on the weekly charts. In particular, the Cardano token bounce has seen it test both its 20-week (near $1.21) and 50-week (near $1.31) exponential moving averages (EMAs) as resistances. They were instrumental in capping ADA gains in January 2022.

Weekly chart of the ADA/USD pair. Source: TradingView

Alex Benfield, an analyst at Weiss Ratings, said that ADA needs to reclaim $1.20 as support, a level that kept its bullish bias intact on multiple occasions in 2021. He noted that if the Cardano token manages to do so, its probability of seeing a rally in the medium term will be higher, adding:

“Until I clear that resistance, this move risks losing momentum.”

ADA is “fundamentally bullish”

Alexander Mamasidikov, co-founder of the cryptocurrency wallet service MinePlex, believes that Cardano’s interim outlook is bullish despite its overbought risks.

The executive believes ADA’s continued growth momentum is more fundamental than technical, noting that the token started rising after it became one of the assets included in Grayscale Investment’s new altcoin fund, dubbed Smart Contract Platform ex Ethereum fund (GSCPxE).

“The growth is testament to how impressed investors are with the Cardano blockchain’s revolutionary role in the fast-growing smart contract-powered Web3.0 evolution”, Mamasidikov stated, though he agreed that levels near $1.50 could play against ADA’s upside move. Extracts:

“From the ADA growth trajectory, the $1 price level remains the crucial support level, while the currency’s resistance is pegged at $1.5 in the short to medium term.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. All investment and trading involves risk, so you should do your own research when making a decision.

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