Cardano (ADA) has formed a deadly “Death Cross” against Bitcoin (ADA / BTC) on the daily chart – a market signal that is often understood as a warning of a short-term slump.
The death cross occurs when an asset’s short-term moving average closes below its long-term moving average. When it does, it signals professional traders to increase their bearish positions in the market.
Yesterday (October 19) the 50-day exponential moving average of ADA (-50-day EMA – velvety wave) fell below its 100-day exponential moving average (-100-day EMA – blue wave) and marked a Friday 50-100 EMA crossover on the daily ADA / BTC chart raising fears of further declines in the upcoming sessions.
Death Cross October 2021 Daily Frame ADA / BTC Price Chart Set | Source: TradingView
This is in part due to ADA’s responses to the previous Death Cross. For example, ADA price fell nearly 38.50% versus Bitcoin in September 2020 after creating a bearish crossover of the 50-100 EMA.
Similarly, on May 12, 2019, a Death Cross pattern caused ADA to decrease by 62.5%.
Daily Frame ADA / BTC Price Chart Death Cross Setup as of May 2019 | Source: TradingView
However, the possibility of an immediate sell-out remains relatively small. This is mainly due to the Daily Relative Strength Index (RSI), which warns the status of ADA against Bitcoin as oversold below 30.
For example, in May 2019, the formation of the Death Cross coincided with an RSI fall below 30. The price then rallied more than 30% to retest the 50-day and 100-day EMAs as resistance. which underscores the overbought intent of the traders.
Applying the same fractal to the current price action, one can expect the ADA / BTC rate to rebound, especially if it falls to a two-month low of 0.00003372 BTC to retest the zone in the first chart above).
The ailing ADA / BTC exchange rate only reflects Cardano’s dismal performance in recent sessions against Bitcoin, which has risen against the US dollar 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.
Another factor that is fueling the downside is the inverse cup-with-handle pattern that is forming on the ADA / USD chart.
Daily frame ADA / USDT price chart setup inverse cup-with-handle pattern | Source: TradingView
In particular, inverse cup-and-grip patterns occur when price forms a large crescent, followed by a modest bullish retracement.
Analysts view these as bearish reversal indicators as they tend to push price down by the maximum distance between the top of the cup and its right low as price falls below the support of the pattern.
ADA’s recent price action coincides with an inverse cup and handle currently attempting to break below the structure’s resistance line near $ 1.97. Therefore, if Cardano confirms a bearish breakout, the target price is in the $ 0.772 to $ 0.82 range.
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Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.
Mr. Teacher
According to Cointelegraph
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