- Cardano is on the brink of massive correction if a break occurs under the rising wedge pattern.
- ADA/USD pessimistic outlook seems to have been confirmed by the RSI as it dives toward the midline.
Cardano has recovered considerably from the December low formed at $0.13. The gradual return of the bulls, however, seems to have stalled at $0.15. Hence, a correction seems to be building momentum with the downside eyeing $0.13. The bearish narrative comes into the picture despite the announcement that Cardona will integrate decentralized finance (DeFi) features.
Cardano’s recovery hits a barrier
The bearish outlook appears to have been validated by the Relative Strength Index as it drops toward the midline. ADA is also trading at the apex of an ascending wedge pattern, suggesting that a reversal is in the offing.
The bearish outlook forms when an asset’s price ascends with pivot highs and lows while converging at a single point referred to as the apex. A breakdown usually occurs before the trendlines converge.
The typical breakdown is mostly confirmed by decreasing volume (highlighting a divergence between volume and price). Breakdowns are generally fast and drastic.
Meanwhile, ADA/USD is trading at $0.155 while holding onto support offered by the 100 Simple Moving Average in conjunction with the ascending trendline. Trading below these two key levels would confirm the rising wedge pattern breakdown.
On the downside, the first point of contact would be the 50 SMA, but Cardano is likely to fall massively to the primary support at $0.13. Note that the 200 SMA might absorb some of the selling pressure, preventing ADA from falling sharply.
ADA/USD 4-hour chart
It is worth mentioning that the pessimistic outlook will be invalidated if the 100 SMA support remains intact. Besides, if the bearish price action does not extend below the wedge, Cardano might stay in the bulls’ hands and perhaps resume the uptrend. Trading past $0.16 could call for more buy orders, creating enough volume for gains above $0.18.