Cardano has formed a double top pattern on the daily chart, suggesting a possible bearish reversal.
The spike in ADA money flow suggests that selling pressure could be stronger, pushing the price lower.
Cardano [ADA] has been underperforming against Bitcoin [BTC] as the altcoin has gained just 0.4% over the past seven days to trade at $347 at the time of writing. ADA is also showing signs of correction as the price has been trading in a narrow range between $339 and $350 over the past 24 hours.
ADA's Bearish Pattern Is Now Clear
ADA’s downtrend could extend as the daily chart shows the formation of a double top pattern. This pattern typically signals a trend reversal, with ADA now facing a potential decline if sentiment does not turn bullish.
ADA sellers tested the neckline of this double top pattern at $339, which is also the 100% Fibonacci level, before the price bounced. If ADA breaks this support and falls further, the price could plunge to $319.
(Source: Tradingview)
For ADA to invalidate the bearish pattern and confirm the uptrend, it needs to break above $370. However, the buying support needed to reach this level of profit is lacking.
The Relative Strength Index (RSI) reading of 46 suggests that sellers are in control. Additionally, the RSI line is pointing south, indicating that bearish momentum is strengthening. The negative Chaikin Money Flow (CMF) also paints a gloomy picture as selling pressure continues to build.
Data from Coinglass confirms that ADA traders are actively selling. Spot inflows recently spiked to $4.28 million, the highest since mid-August. This suggests that traders are moving their coins to exchanges to sell.
Source: Coinglass
Derivative Data Analysis
The derivatives market shows that while sentiment is bullish, bearish signs continue. ADA’s open interest has risen to $238 million at the time of writing, according to Coinglass. This metric is at a monthly high, indicating high interest in the altcoin.
ADA's long/short ratio of 1.07 shows that there are only slightly more long traders than shorts. On Binance, over 90% of open positions on Cardano are long, indicating optimism in the market.
Source: Coinglass
Despite the long trend, traders who were expecting ADA to rise are still suffering losses. In the past 24 hours, $441,000 worth of ADA longs were liquidated while only $16,750 worth of shorts were liquidated.
However, whale activity could signal a price change for ADA. Large ADA transactions have spiked recently, suggesting that whales may be accumulating more.
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