Cardano (ADA) trimmed a large chunk of its weekly losses during this week’s crypto market rout.
The price of ADA reached an intraday high of $0.60 on May 13, after a 58% rebound from this week’s low of $0.38 the previous day.
A huge upside retracement appears in similar price action In the cryptocurrency market of the top cryptocurrency Bitcoin (bitcoin) and ether (Ethereum) have rebounded 23% and 25.75% from yesterday’s lows.
But ADA’s sharp recovery does not warrant a continued upward continuation, at least according to the three factors discussed below.
The stock market crash is far from over
First, the price action of Cardano and similar crypto assets in step U.S. stocks, especially tech stocks.
Notably, on May 13, the correlation coefficient between ADA and the tech-heavy Nasdaq Composite was 0.93, which means that any significant movement in the stock could lead Cardano in the same direction .
Also, the Nasdaq is unlikely to recover significantly right now, as analysts highlight the overvalued valuations of big tech stocks and the potential for them to collapse further in a higher interest rate environment.
“this [ax] It’s hanging on top of high-growth tech companies,” Opinion Richard Waters, FT West Coast editor, added:
“This is where valuations are the tightest and where the market has the hardest time finding a bottom.”
In short, Cardano’s continued positivity Correlation with Nasdaq Could lead to a larger drop in the ADA market, at least for now.
ADA’s “Fifth Wave Missing”
Second, another potential implication Cardano price drops From the technical structure highlighted by independent market analyst Crypto Capo.
anonymous analyst notes Given that it has the potential to depict the fifth and final wave of the bearish Elliott Wave setup, ADA could next move towards the $0.30 to $0.35 range, as shown in the chart below.
The target range coincides with the support area before the 850% bull run in January 2021.
Downstream channel breakdown
Third, Cardano has been falling below its multi-month descending channel, another sign of weakness.
ADA has been trending down within a range defined by two descending parallel trend lines, which underscores the current strategy of traders buying near the lower trend line and selling toward the higher trend line.
But on May 12, ADA/USD broke below the lower trendline near $0.568, suggesting that traders ignored buying opportunities.
Instead, buyers emerged around $0.378 Accumulate ADA, causing the price to rebound, as described above. However, the volume in support of the recovery was lower than during the sell-off, suggesting that the rally has weakened.
Meanwhile, after testing the bottom of the descending channel as resistance, the upside retracement is showing signs of further weakness – a way to confirm a break below. If the bulls fail to flip the price cap to support, the chances of ADA continuing its current downtrend will be much higher.
Conversely, a decisive move above the channel’s lower trendline could see ADA then test its upper trendline near $1.
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