ADA has established lifetime trend lines following the conclusion of the 2022/2023 bear run. The bear run low at $0.22, provides us a connecting dot to the 2020 bear run low of $0.018, allowing us to establish a Lifetime Support line. Likewise, the conclusion of the 2021 bull run provided us with a connecting dot for a Lifetime Resistance line.
Now that we established a trend, how heavily can we rely on those lines? What about other areas of support and resistance? Will the altcoin market respond to market forces and reach new highs?
How do we trade this? 🤔 Let's answer these questions in order and expand upon them:
1. How heavily can we rely on these trend lines?
As heavily as any other established trend line. While it's important to remember that altcoin markets are more volatile than higher volume markets such as Bitcoin or especially Forex, these support and resistance areas *are* the data. Our analysis frames the playing field such that we can apply trade management strategies to gain a profit, which means any trade we should consider these price areas to be the boundaries of our trades.
2. What about other areas of support and resistance?
Lifetime Support and Resistance frame our macro trend, but we need to zoom into the EMA ribbons and previous areas of support and resistance. After the conclusion of the 2022/2023 bear run, ADA broke through the 30EMA and 200EMA ribbons and established support on both. In my analysis rubric, the 30EMA and 200EMA ribbons are immensely important in determining what price areas are respected by a security.
Currently, ADA is following the movements of Bitcoin and the crypto market as a whole. My Bitcoin Lifetime Analysis explains why I believe Bitcoin needs a strong pullback before reaching new all-time highs:
If Bitcoin fails to find a new all-time high here, ADA will likely stall and fall with it. The degree to which it falls is up for debate, but I would argue we will see the price fall to $0.50 (Weekly 200EMA) at a minimum, with a worst-case being $0.40 at Lifetime Support, maybe a wick into the $0.35 range. This will likely come in the form of a two-legged pullback on the Weekly chart.
Once that pullback concludes alongside Bitcoin, we should see another attempt to find new highs with Bitcoin. If ADA and the altcoin market are going to find strong upward momentum, it will be after Bitcoin and Ethereum find new all-time highs, generating excitement and volume. I'll be honest, what happens with the price from here is difficult to estimate. I believe what is closer to a worst-case scenario is ADA stalls around the 2021 Resistance Zone at the $1.50 range. A best-case scenario is it reaches near the Lifetime Resistance at $7.50. Somewhere in the middle, reaches the previous all-time high of $3.10.
We need to see the market reaction to the pullback and Bitcoin reaching new all-time highs to remotely begin estimating where ADA will land.
3. Will the altcoin market respond to market forces and reach new highs
There are a variety of arguments for and against the notion that we'll get another "alt season" where the alt market securities find new highs. My position on this is that we don't have nearly enough evidence to conclude that the alt market will be strong during this next bull run.
Here are some key points regarding what we do have:
1. Price Action is truth and we have price action data. Bitcoin has had a 300% increase in price since the 2023 $15,500 low, ADA has had a 200% increase in that same timeframe.
2. Volume into BTC and ETH proportionally is greater than the volume into the alt coin market.
3. ADA is respecting support and resistance areas and responding to macro crypto market sentiment.
4. The altcoin market is bloated, but the top 20 coins are more insulated from that bloat.
5. The RSI, a weak indicator on its own, shows us that the market is burning hot and needs a cooling-off period. This supports my other data points.
So where does that leave ADA? As previously stated, we have some key events that need to play out before we can have any confidence in where ADA ends up by 2025. Those include the pullback I believe is coming, followed by Bitcoin and Ethereum finding new highs. Once we hit those marks, we can start talking about $1.50, $3.00, and $7.50 price targets.
The Trade
That being said, we can still construct a reasonable trade based on the data we have. There are two ways to play this chart, wait for the pullback and start buying around $0.50, or start buying now and fade your position in either direction. Personally, I'm going to put weight on my overall crypto analysis and wait for the market to pullback.
My ideal buy for ADA would be at $0.57 after we see an established bounce off of the EMA ribbons. I would place a stop loss below the previous bear trend low at $0.18. My take profit targets would be as follows:
Take Profit #1: $0.96. For two reasons, this is a 1:1 Risk/Reward ratio, so if I sell half of my position and move my stop loss to my entry price, profits are locked in, and I can swing the second half of my position. The second reason is there is a minor resistance zone at $1.00 on top of $1.00 being a psychological resistance price. $0.96 allows us to sell before that resistance is met.
Take Profit #2: $1.50. I would sell 25% of my remaining half because this is a major resistance area where a lot of trading happened. This is also about 1:2.5 Risk/Reward, which is reasonable to take more profit.
Take Profit #3: $2.95. Take another 25% of the second half of the position off the table just before the previous all-time high is met. This will be a major resistance area and the likelihood of it breaking is far less than the $1.50 resistance area. This is also a 1:6 Risk/Reward area, absolutely reasonable to take profits this late in the game.
Take Profit #4: $6.85. The final 50% of the second half of my position (25% of my original position), will be taken off the table before we get close to the Lifetime Resistance price of $7.50. $7.00 will be a psychological barrier and close enough to $7.50, where if we hit that price, it will be a very low probability compared to just under $7.00. $6.85 is 1:16 Risk/Reward, a massively successful trade at this stage and completely reasonable to close the entire trade and be very satisfied with the results.
💡 Trade Idea 💡
Long Entry: $0.57 🟥 Stop Loss: $0.18 ✅ Take Profit #1: $0.96 ✅ Take Profit #2: $1.50 ✅ Take Profit #3: $2.95 ✅ Take Profit #4: $6.85 ⚖️ Risk/Reward Ratio: 1:16
🔑 Key Takeaways 🔑
1. Price Action is truth and we have price action data. Bitcoin has had a 300% increase in price since the 2023 $15,500 low, ADA has had a 200% increase in that same timeframe. 2. Volume into BTC and ETH proportionally is greater than the volume into the alt coin market. 3. ADA is respecting support and resistance areas and responding to macro crypto market sentiment. 4. The altcoin market is bloated, but the top 20 coins are more insulated from that bloat. 5. The RSI, a weak indicator on its own, shows us that the market is burning hot and needs a cooling-off period. This supports my other data points.
💰 Trading Tip 💰 It's reasonable to take half profits at the first resistance target in a long trade, or the first support target in a short trade. Using a 1:1 Risk/Reward Ratio for your first target, you can move your stop loss up to your entry price, locking in profits. This allows you to watch the rest of the trade execute without worry of losing money. This helps improve trading psychology and the equity in your account.
⚠️ Risk Warning! ⚠️ Past performance is not necessarily indicative of future results. You are solely responsible for your trades. Trade at your own risk!
Fantastic analysis, thank you! I'd be over the moon with a $7.50, but a more reasonable price in my mind is around $5. Let's see what happens.
TraderEngineering
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Thank you @LMzCrypto! I would be ecstatic as well. I think you’re exactly right with the $5 price point. This is why 75% of my initial position would be closed by the time the previous all-time high of $3.10 is hit. If we see market reversal signs near $5, you bet I’ll take the rest of my position off the table!
@TraderEngineering, Enjoyed the analysis and information points you brought up… 1.50-3$ / 6-7.50$ are very reasonable outlook’s…. 2017 ADA was 1.31 peak while 2022 ADA was a little over 2x at $3.10. A repeat would put this right in overall range with variance for unexpected events to the downside or upside…
I think your targets are most probable (including the pullback to at least 30%) but if the broader market has a melt up due to unforeseen events or continued Bitcoin ETF hype….I would be ecstatic at 10 and euphoric at 15$ in a year or two. Also as someone said this market could be shorter than prior ones depending on a lot of broader economic factors at play.
One surprise variable so far is Bitcoins performance and hitting its all time high..Never has it done this in a pre halving year. Usually we see a modest buyback and a reset. Time will tell what this overall impact will be.
TraderEngineering
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@Christofphalies, I think you're exactly right on all points. A $15 Cardano would be fantastic and I think is absolutely possible given the right conditions, it's just a bit far out of my current analysis. This Bitcoin surge pre-halving is definitely a surprise, my analysis showed the price had a good chance of pulling back the 30%-50% before or at the $53,000 price area, but here we are! This will be only the second time we've reached new all-time highs without touching lifetime support and the first time before the halving. More new data to add to the set! I appreciate your thoughts on my analysis, thank you!