Cardano (ADA) has covered most losses incurred during the recent drop. ADA hit an intraday high of $0,60 on May 13, one day after it bounced back from a weekly low of $0.38 – a 58% gain. The huge upside retracement occurred alongside the rebounding of top coins like Bitcoin (BTC) and Ether (ETH), which were up 23% and 25.75% respectively from the May 12 lows.
But the ADA rally won’t last long, at least according to the three factors discussed below.
After the Recent Crash, the Stock Market Is Far From Recovering
The price action of Cardano and similar cryptos have been affected by U.S. equities, especially tech stocks.
Notably, the correlation coefficient between ADA and Nasdaq Composite was $0.93 on May 13, meaning that any big move in the stock would likely point Cardano in the same direction.
Furthermore, the chances of Nasdaq undergoing a sharp rebounding are really slim, as analysts highlight the overvaluation of Big Tech stocks and their possibilities of crashing in the higher interest rates environment.
Richard Waters, Financial Times editor, said:
“This is where valuations became most stretched, and where the market is having the most trouble finding its nadir.”
Simply put, the positive correlation between Cardano with Nasdaq could lead to a steeper decline in the price of ADA, at least for now.
Missing the Fifth Wave
Another hint of potential decline in Cardano comes from the technical structure highlighted by famous analyst Capo.
The analyst noted that ADA could drop to the range of $0.30–$0.35 to complete the fifth and final wave of a bearish Elliott Wave setup, as shown in the chart below.
The target range coincides with the support zone formed in January 2021 that preceded an 850% bull run.
Breaking the Descending Parallel Channels
Cardano has been breaking below its multi-monthly descending channel.
ADA has fallen inside the range defined by two falling trendlines, emphasizing traders’ strategy of buying near the lower trendline and selling toward the upper trendline.
But on May 12, ADA/USD broke below the trendline near $0.568, showing that traders are no longer keen to buy at this line.
However, buyers showed up near the $0.378 level to accumulate ADA, leading to a price rebound, as discussed above. Trading volume is now easing off after the recent recovery, showing a weakening bullish trend.
Simultaneously, the uptrend is currently stalled at the trendline of the previous ascending channel. If the bulls fail to reclaim this line, the possibility of ADA continuing its downtrend is highly possible.
Conversely, regaining this line could have ADA then test its upper trendline near $1.
Disclaimer: This article is for reference purposes only, not investment advice. Investors should have deep research before making a decision. We are not responsible for your investment decisions.
(Reference: Cointelegraph)
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