ADA has been on a strong bull run since October of this year and we've finally come to the end of a measured move and three legs up. Are we gearing up for a reversal?
How do we trade this? 🤔 We don't have enough evidence for a short entry just yet, but we do have some key data points in our favor. We've completed a measured move to the current price, had three pushes up in a bull trend, two failed attempts to break $0.68, and a gap down below the large bull candle.
What we're missing are the sell confirmation candles. ADA needs to break below the Daily 30EMA, close a strong bear candle, and possibly test the 30EMA as resistance before we enter a short. The re-test of the 30EMA as resistance isn't required, but would add to the probability of profit if achieved.
Once these conditions are met, it's reasonable to enter a 1:1 Risk/Reward Ratio trade around $0.565, placing a protective stop around $0.70, which puts your take profit at $0.43 above the previous high or "Support Zone". This is a conservative trade because we have several areas of support to consider.
💡 Trade Idea 💡
Short Entry: $0.565 🟥 Stop Loss: $0.700 ✅ Take Profit: $0.430 ⚖️ Risk/Reward Ratio: 1:1
🔑 Key Takeaways 🔑
1. Potential Double Top after there pushes up. Bias to Short. 2. Large Pin Bar Top on Second Attempt. 3. Wait for break below Daily 30EMA to Enter Short. 4. Large Bull Bar after Breakout, Gap to Close. 5. RSI at 57.00 and below Moving Average. Bias to Short.
💰 Trading Tip 💰 Reversal trading is inherently low probability because you're betting against the trend. The tradeoff is your reward will be much higher if you swing trade it. This kind of trade is the inverse of trend trading, where the probability is higher but the reward is lower.
⚠️ Risk Warning! ⚠️ Past performance is not necessarily indicative of future results. You are solely responsible for your trades. Trade at your own risk!
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ADA is still in the same trading range as when the initial analysis was posted, we're still waiting for our short confirmation to consider the reversal trade. During this time, I would be long scalping the 15m or 1HR charts at the bottom of the range around $0.58 and taking profits in the $0.63 area. I still believe the market conditions are closer to a trend change than a continuation, but I wouldn't take another bull leg up off the table just yet.
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ADA followed the rest of the crypto market sell-off and gave us a prime sell confirmation on January 3rd. Adjusted entry is $0.553, take profit $0.448, stop loss at $0.688 for a 1:1 Risk/Reward Ratio. Bitcoin is currently retracing and may re-test $46,000. If it gets rejected again, expect a drop in the alt-coin market that will likely satisfy this trade.
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ADA is continuing the follow-through to the downside, attempting to close the gap of the large bull bar from December 8th 2023. Be aware we could get one more attempt to the Previous High Resistance if Bitcoin decides to break $45,800 and rile up the alt coin market. I think that outcome is unlikely, but it needs to be in the back of our heads as we watch these Daily candles close.
I argue we hold this trade until the price action gives us a reason not to. If it does run toward the upside, I would leave the trade alone and bet that a new high won't be put in. If the price continues to march into the profits, we can watch closely and ensure that no strong reversal signals appear.
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Following up on this analysis, ADA did end up closing the gap of the large bull bar as depicted here and in my previous charts. I should have added a support line for that bull bar to make it clear and possibly as a profit target, because the price absolutely bounced off of it! If you're still in a trade, I would consider exiting as the price action indicates more upward movement.
The proper exit signal was on the close of the January 8th Daily candle; strong bull signal bar closing on its high.
A new ADA analysis will be coming shortly! Let's see what these next bars provide.
@saynab44, Yes! The premise of the analysis has not been invalidated. Likewise, we still have not printed a strong bear candle closing below the 30EMA and re-testing it as resistance. We're stuck on the sidelines until we get a break below or a new high!
saynab44
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@TraderEngineering, thx for the reply! So every pullback is a buy from here on? And what is your price prediction Q2 and Q4 next year?
TraderEngineering
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Anytime @saynab44! To answer your pullback question, it depends on the timeframe and what kind of trade you're executing. The short trade in this analysis is being executed on the 4HR and Daily charts and we're just trying to capture the potential move back down to the previous high of $0.40, something that might happen over the course of a couple weeks. On the 1HR or 4HR chart, this would be considered a trend reversal while on a Weekly chart, it's just a pullback. If we zoomed out to the Weekly chart and charted our analysis over a longer period of time then yes, I would be buying the pullbacks because the long-term trend is ultimately bullish.
Regarding your Q2 and Q4 question, I don't have a lifetime analysis for ADA right now and to be honest, the alt market is very difficult to chart that far out on such a volatile market. Some data points indicate that the alt market won't perform as well as it has in the past in terms of gains and that Bitcoin and Ethereum will be the better trades. I do have a Bitcoin lifetime analysis where I argue that Bitcoin needs a 40%-50% pullback from here before reaching new all-time highs and that bull run won't start until we're closer to the summer of 2025. If that happens, Bitcoins fall will likely drop the alt coin market as well before going up. The million dollar question is, how will the alt market response once Bitcoin starts climbing to its previous high around $68,500 and beyond? No one really knows, but it wouldn't surprise me if ADA was one of the better performers.
This is that Bitcoin Lifetime Analysis in case you're interested:
Let me know what you think! I appreciate the comments.