Cardano (ADA) is currently forming a bullish divergence on the 3-day chart, a pattern that has preceded massive rallies in the past. Historical cycles show that ADA tends to follow an accumulation, breakout, expansion structure.
In the first cycle, Cardano consolidated for around 60 days in a tight range, building a base above $0.30, before rallying approximately 229% over 146 days. The second cycle was slightly longer, with around 90 days of consolidation and a subsequent rally of nearly 360% over 132 days.
In the current scenario, the price movement indicates the entry of ADA into the latter stages of the correction phase or the early stages of an accumulation phase, as seen in the previous rallies.
The correction is not very steep, and the selling pressure is gradually slowing down. The ADA is range-bound around the levels of $0.33-$0.35, which was identified as the support level before the major rallies in the past.
The momentum oscillator, especially the RSI, is exhibiting bullish divergence, which confirms the start of the absorption of the bearish pressure.
Source: X
Also Read: Cardano (ADA) price declines but traders still eye recovery toward $0.96
Cardano Falling Wedge Signals Potential Reversal
In the 4-hour chart, Cardano is seen to be moving inside a falling wedge, which can be a signal that the selling pressure is nearing exhaustion.
ADA has also been forming lower highs and lower lows, but the strength of the downside movement is slowing down, as can be seen by the compression of the range. Analysts have also observed that the rejection at the $0.38-$0.39 level is becoming less sharp.
The momentum indicators on the lower panels are consistent with a bullish divergence, where price forms lower lows while momentum forms higher lows. This is usually a reversal sign when observed on a declining wedge pattern.
However, if ADA holds on to the demand level of $0.33-$0.35 while overcoming the decreasing resistance with substantial volume, the resistance levels to watch will be $0.42, followed by $0.47-$0.48.
Source: X
ADA Shows Signs of Re-Accumulation for Potential Q1 Rally
It is imperative that the range between $0.33 and $0.35 be sustained. A fall below this level would erase the bullish argument and may prolong the phase of correction.
Analyst Surya also points out that a return to the $0.38-$0.39 level would be significant in an indicator confirming a trend reversal. In structural analysis, Cardano seems to be making the transition from the distribution phase to the re-accumulation phase.
Looking at the past cycles and the momentum that ADA possesses at the moment, it is likely to witness another multi-month boost in the market, similar to the past two cycles, if the circumstances turn in favor of the market.
Also Read: Cardano Technical Analysis: Can ADA Recover Toward the $0.66 Resistance Level?
