Cardano (ADA) has formed a deadly “death cross” versus Bitcoin (BTC) on its daily chart – a market signal that is often viewed as a warning of further decline in the near future.
The ominously titled indicator begins to appear when an asset’s short-term moving average closes below its long-term moving average. In doing so, it encourages tech-savvy traders to increase their declining positions in the market.
ADA / BTC is in trouble
On Tuesday, the 50-day exponential moving average (50-day EMA; velvet wave) fell below the 100-day exponential moving average (100-day EMA; blue wave). This marks a bearish crossover of Friday’s 50-100 EMA on the ADA / BTC daily chart, fueling fears of further declines ahead.
That was in part due to ADA’s previous price reaction to Death Crosses. In September 2020, for example, the price of the Cardano token fell by almost 38.50% after a 50-100 EMA crossover against Bitcoin.
Similarly, on May 12, 2019, a death cross pattern then saw a price drop of 62.50% afterwards.
However, the possibility of an immediate sell-off remains relatively small. This is mainly due to the ADA’s Daily Relative Strength Index (RSI), which warns the status of the token of an oversold Bitcoin, below 30. Traders generally view the oversold RSI as a sign of market entry.
For example, in May 2019, the formation of the Death Cross coincided with the RSI below 30. The price then rebounded more than 30% to retest the 50-day and 100-day EMA waves such as the resistance level, emphasizing the overbought intent of traders. electronic money.
Applying the same fractal to the current price action, the ADA / BTC rate can be expected to rebound, especially if it falls to a two-month low at 0.00003372 BTC, around the five-month identified by 0.00003192-0.000003075 BTC -Test the support area again (red bar in the first diagram above).
This inverted cup and handle
The ailing ADA / BTC exchange rate only reflects the awkward performance of Cardano against the US dollar in recent sessions against Bitcoin, which has risen against the greenback over the same period.
For example, Bitcoin’s monthly gain against the dollar is around 43%. Meanwhile, Cardano’s price has fallen by more than 6% over the same period.
However, anticipate further weakness after an inverse cup-and-handle pattern formed on the dollar charts.
Specifically, the inverse trophy and handle patterns occur when price forms a large sickle, followed by a modest bullish retracement.
Analysts view them as bearish reversal indicators as they tend to push price down the maximum distance between the top of the cup and its lower right corner if price falls below the pattern’s support.
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ADA’s recent price action is in line with the inverted cup and handle plot, with price currently attempting to break below the structural resistance line near $ 1.97. Therefore, the downside target is in the $ 0.772 to $ 0.820 range if Cardano confirms a bearish breakout.