Cardano (ADA) has created a false breakout above an important resistance level. It may drop down to a crucial support level at $0.3.
Weekly outlook
Cardano (ADA) price has been creating a bullish structure since reaching its lowest level at $0.24 at the end of December 2022.
This increase has helped the price break above the horizontal resistance level at $0.42 during the week from April 10 to 17 and reached a new yearly high of $0.46. However, it created a bearish engulfing candle in the following week and dropped back below the $0.42 level. This is a bearish signal, often leading to a sharp decline afterward.
Indeed, after confirming the $0.42 level as resistance during the week from April 24 to May 1, the ADA price broke down below the low of the bearish engulfing pattern ($0.38), marking the continuation of the previous decline.
Therefore, the ADA price may test the crucial support level of the uptrend structure at $0.3, indicating a nearly 20% drop from the current level.
The weekly RSI indicator supports this possibility as it dropped below 50 and is sloping downwards.
Ascending parallel channel
The daily chart shows that the ADA price has been trading within a rising parallel channel since the yearly low at $0.24. This is a bearish pattern that often leads to a breakdown in most cases.
This is further reinforced as the price is currently trading at the lower part of the channel, and the RSI is approaching oversold territory.
Therefore, the price is likely to break down below the support line of the channel at $0.34 and drop to the long-term support level at $0.3, as mentioned above.
However, if the price bounces back from the $0.34 support level, it may retest the short-term resistance level at $0.38 before making another attempt to break down.
Conclusion
The most likely outlook suggests that the ADA price will continue to drop to $0.3. Breaking below the $0.34 support level will confirm this possibility.
Disclaimer: Please note that this article is for informational purposes only and should not be taken as investment advice. As an investor, it is important to do your own research before making any decisions. We are not responsible for any investment decisions you make based on this information. Not Financial Advice.
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