Cardano (ADA) surged 25% over the past week, breaking through a key resistance level—the upper line of a descending triangle pattern. This bullish breakout initially sparked optimism, with the market expecting a potential return to a two-year high of $1.32.

However, the upward momentum stalled thereafter. Over the past two days, reduced buying pressure has led to the price of ADA consolidating in a narrow range.

Is Cardano about to lose momentum?

Last week, Cardano's rebound pushed its price above the upper line of the bearish descending triangle pattern traded in previous weeks. This bullish breakout initially triggered optimism as traders looked towards potentially reclaiming the two-year high of $1.32.

However, due to reduced buying pressure, the price of ADA has been consolidating in a narrow range over the past two days. Its resistance level is $1.11, and support level is $1.05.

When asset prices trade in a narrow range, it indicates that the market is in a period of indecision, with buyers and sellers evenly matched. Typically, consolidation occurs before significant price fluctuations as traders await a breakout or breakdown to signal the next trend direction. Due to technical indicators showing a collapse in buying activity, the price of ADA may retrace some of its recent gains.

For example, its declining line readings support this bearish view. As of this writing, the indicator is in a downtrend and has been since the price consolidation began.

The Aroon indicator measures the strength and direction of a trend by analyzing the recent highs (Aroon Up line) and lows (Aroon Down line) of an asset. When the Aroon Up line declines, the frequency of recent highs decreases, indicating a weakening bullish momentum or a potential shift to a bearish trend.

Additionally, the negative weighted sentiment of ADA reflects an increasing bearish tendency towards altcoins. As of this writing, the index stands at -0.71.

When the weighted sentiment of an asset is negative, it indicates that the overall market sentiment measured by social data is bearish. This suggests that the pessimism among traders and investors outweighs the optimism, which could impact the price performance of the asset.

Open interest and retail long ratio

As ADA/USD soared above $1.09, open interest (OI) climbed to $253.88 million, reaching the 85th percentile.

The proportion of retail long positions has rapidly narrowed to 67.52%. This divergence indicates strong interest from institutional investors, while retail investors tend to short.

Cardano's price trend shows a persistent rise and fall, confirming the bullish trend. The histogram indicates that open positions are significantly concentrated at high levels, suggesting increased leverage activity.

Despite ADA maintaining upward momentum, retail shorts are still present, indicating that if prices continue to rise, there may be a liquidation risk.

A breakout above $1.05 accompanied by increased buying pressure marks a decoupling of retail positioning from market direction.

If these conditions persist, the price of Cardano may retest higher resistance around $1.15. However, continued selling by retail traders may exacerbate volatility.

Data reflects a shift in the market towards institutional dominance, while retail traders are positioning against the trend.

Bullish breakout or further decline?

As of the time of writing, ADA is trading at $1.08. The increasing bearish tendency towards the token may pull it towards the support area at $1.05. If the bulls fail to hold this level, the token's price may drop below the $1 mark, trading at $0.94.

On the other hand, if market sentiment shifts and becomes bullish, the price of Cardano could break through the resistance level of $1.11 and reclaim the two-year high of $1.32.

In summary

Cardano surged 25%, breaking through a key resistance level, but reduced buying pressure has led to price consolidation.

The Aroon down line and negative sentiment signal a loss of momentum and potential further decline.

ADA is trading at $1.08, with key support at $1.05; if this support level fails to hold, it could drop below $1 to $0.94.