Cardano’s Shelley Has Investors Buzzing At Just The Right Time (Cryptocurrency:ADA-USD)

Via SeekingAlpha.com

After a period of consolidation on the charts, Cardano (ADA-USD) seems to have picked up momentum with a bullish move in the last week as it trades against its main BTC pairing. Is this a sign that ADABTC now has bullish momentum or is the present spike in price simply a retracement in a downtrend which would favour sellers in the long run? These questions are answered in the analysis for the pair below, which provides the price outlook for the rest of Q2 2020.

Fundamental Analysis

Cardano’s price surge against Bitcoin seems to have been engineered by the confirmation of the release date of the Shelley hard fork. The Shelley hard fork release date was announced by Charles Hoskinson (creator of Cardano) last week and is expected to mark the transition of the token to a proof-of-stake consensus algorithm. The timeline commences on June 9 and ends with the completion of the transition on June 30.

Cardano has gained nearly 60% against Bitcoin since the announcement of the Shelley upgrade. 1.6 billion ADA tokens are being held in 3,200 tokens. Data from IntotheBlock, which reveals the number of wallets that are either in the money or out of the money for each token, shows a preponderance of ADA wallets that are in the money. Investors may be confident that ADA could still have some upside momentum left in it and could induce some FOMO buying.

Technical Analysis

While the technical analysis on this piece was being written, price began to stage a huge rally. This can be seen on the weekly chart as the long bullish candle, which eventually hit the resistance at 0.00000867. This candle was able to breach the resistance zone defined on the chart between 0.00000623 and 0.00000646.

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ADABTC Weekly Chart: May 28, 2020

A clearer dissection of the price action on ADABTC can be seen on the daily chart, where the breakout move can be better visualized. This all started with the double bottom which formed on the 200-day moving average, which acted as a support in conjunction with the ascending trendline that connected the lows of the price bars between March 2020 and the present. The price level at 0.00000578 formed the neckline of the pattern. The break of price above this trendline confirmed the pattern, and the price achieved the projected measured move at the upper border of the first resistance zone on 22 May 2020.

Price, however, retraced down to the broken neckline, which was now functioning in a role reversal as price support. After a few bounces, the price was able to gather enough momentum to break above the price projection point of the double bottom pattern at 0.00000578. This move only reached exhaustion at the junction between the horizontal resistance at 0.00000804 (previous high of 1 July 2019) and the ascending trendline which connects the highs of 13/25 August 2019, 18 September 2019, and 13 February 2020.

ADABTC Daily Chart: May 28, 2020

This trendline and resistance area at 0.00000804 remains the price level to beat for buyers. If the price is able to gather more momentum to breach the trendline, this would open the door for ADABTC to aim for the 0.00000867 price level. Further advance would allow the price to target the next resistance zone between 0.00000938 (cluster of lows of May 2019) and 0.00000991 (lows of 22 May to June 1, 2019). Further resistance targets can be found at 0.00001095, 0.00001215, and 0.00001355 but would require a monumental recovery in ADABTC prices to be able to hit those targets.

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On the flip side, a rejection at 0.00000804 could initiate a pullback move, which is usually an exhaustion sequence after such a spike in prices. This sequence could send the ADABTC pair back to 0.00000724, where price action is expected to test that support level. If it fails to hold, then price action could take the pair towards 0.00000696. Below this area, 0.00000646 (upper barrier of initial resistance zone now functioning as a support level) forms a new target. A breakdown of this zone could initiate another free fall for the pair.

Sentiment

  • Long-term: Neutral
  • Medium-term: Bullish
  • Short-term: Bearish

The long-term trend is visible on the monthly chart and assumed a neutral stance, as price no longer shows lower highs. The latest price surge has produced a change of sentiment from bearish to neutral.

Medium term, price is now showing higher lows and higher highs, within the two ascending trendlines that individually connect the highs and lows of price action. In the short term, price exhaustion and a pullback are expected for the pair, which imparts a bearish sentiment on the asset that could be temporary in nature.

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Disclosure: I am/we are long ADA-USD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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