Cardano (ADA) price has fallen 46% since the yearly high and is now facing a make-or-break price level for a bullish reversal
The ADA/USD daily chart is currently charting a path within a descending channel that has defined a bearish trend since early March.
On Monday, ADA price peaked near $0.475, encountering significant resistance at the upper boundary of the channel and the key 20-day exponential moving average (EMA), currently at $0.47.
This resistance level is crucial in the short term as it coincides with a historical price rejection point, confirming its importance. At press time, ADA is trading around $0.44. The 20-day EMA ($0.47), 50-day EMA ($0.54), and 100-day EMA ($0.51) are converging above the current price level, indicating a dense resistance zone. The 200-day EMA at $0.52 reinforces this barrier, underscoring the strong bearish momentum.
The Relative Strength Index (RSI) on the daily chart is currently at 38, not entering the oversold zone (below 30), but indicating bearish momentum that could see further declines unless a reversal occurs. For a bullish reversal to occur, ADA needs to break above the $0.47 mark (20-day EMA) on a sustained basis with high volume to confirm a breakout of the descending channel and change the market sentiment. The EMA cluster then acts as a central resistance zone.
A breakout of this range is essential to establish bullish momentum to break above the yearly high from March at $0.81. If not, ADA prices could trend towards the channel midline and break below $0.40. In-depth Weekly Chart Overview, Turning to the weekly chart, the broader picture also highlights the bearish sentiment that has dominated since ADA peaked at $3.17 in late 2021. A series of lower highs and lower lows is typical of a downtrend.
The price action remains capped below the long-term moving averages: 20-week EMA at $0.52, 50-week EMA at $0.48, 100-week EMA at $0.51, and 200-week EMA at $0.52, all of which are sloping down, highlighting the ongoing selling pressure in recent weeks.
The Fibonacci retracement levels from the $3.17 high to $0.22 low provide further insights. Currently, ADA is trading close to $0.$44, above the major psychological and technical support at $0.40.
The closest significant Fibonacci retracement level is the 0.236 level at $0.918, which ADA has struggled to surpass. A break above this level could open the way to higher Fibonacci levels at $1.348 (0.382) and $1.697 (0.5), which would require a significant shift in momentum and buying interest.
Overall, for ADA to escape its bearish confines, attention should focus on the daily resistance around $0.47 (descending channel breakout). Overcoming this barrier is crucial to confirm a bullish reversal. Until this level is breached on a significant volume basis, the outlook remains biased towards continued bearishness.
