NOIDA (CoinChapter.com)—Despite its recent recovery rally, Cardano’s ADA token might be at risk of a correction due to bearish cues from a technical setup.
ADA price has been rallying following the recent Bitcoin halving event, likely enjoying the wider bullish market sentiment. As traders book profit from the recent BTC bull run, sometimes they put their gains in altcoins for more profits, which likely helped ADA’s price rally.
However, bearish risks for the token remain.
Cardano Price Paints Bearish Technical Pattern
ADA price has formed a bearish technical setup called the ‘bear flag pattern.‘
The bear flag pattern appears on a cryptocurrency price chart when a brief, sharp countertrend movement—often referred to as the flag—follows a preceding downward trend. The formation typically signals a potential reversal of the countertrend.
In a bearish continuation setup, volume levels may stabilize or decrease during consolidation. During the consolidation period of a bear flag setup, the market often trends upward in response to the initial price drop, triggering FUD.
The emotional response typically results in higher-than-average trading volumes as investors and traders re-enter the market to capitalize on or mitigate the price movement’s effects.
Traders calculate the bear flag pattern’s price target by subtracting the flagpole’s length from the breakout price level. As a result, ADA price might drop to $0.322, a 36% drop from the current price level.
Death Cross Threat
Sadly, the bearish cues for the Cardano token do not end with the bearish technical pattern.
ADA price action has resulted in the token’s 50-day EMA (purple wave) and 100-day EMA (blue wave) forming a death cross, while Cardano’s 20-day EMA (red wave) and 200-day EMA (green wave) forming another death cross.
Traders usually believe the pattern indicates negative market sentiment against a token. As such, the ADA price could face an increase in bearish pressure, forcing it to test the support level near $0.476.
Moreover, breaching the immediate support level might result in the Cardano token price dropping to the support near $0.415, erasing all its gains since Dec. 2023.
On the other hand, if ADA attracts buyers’ favor, the token could rise to the 50-day EMA and 100-day EMA resistance confluence near $0.566. Flipping the confluence resistance could induce confidence in the ADA bull run, helping the token rise to the resistance near $0.63 before paring gains.
The relative strength index for ADA remained neutral, with a score of 43.67 on the daily charts.
