Hi traders!
After yesterday's crash Cardano has bounced back nicely. But when we look at the waves in smaller timeframes we can see that these are not impulse waves. This should give us a warning sign that we are not out of the woods. Looking at the bigger picture, a 5th and final wave down is possible!
Levels
The VPVR indicates resistance volume at $1.47 and upwards.
Averages
The 21 MA is heading down towards the same area. Currently the 200 MA provides support, but price has not touched it yet.
Waves
If we follow the current count, we can (unfortunately) assume that the 5th wave is still to come to complete the entire consolidation. If we extend targets, the $0.93 area shows confluence. If you zoom out, this is also the upper trend line of the channel (switch to Weekly to see it).
How likely is another breakdown?
This also depends on how crypto correlates with DXY and the Nasdaq. The dollar has shown a reversal and a strong follow-up. Another surge in dollar strength can be dangerous for crypto and lead to this final breakdown. If the dollar remains weak, I expect that ADA will not break down but range instead with a slightly bullish angle.
How to tell when ADA breaks down?
Wave 4 corrections are typically not very deep. If ADA moves up further from here - especially above the green line "bullish confirmation", the wave count is invalid. That means a breakdown is likely avoided and the entire correction is complete.
How to trade it?
A short entry (SE) inside the red box can be attempted. If ADA moves up and out of the box, the position should be exited and we switch to a bullish bias.
Happy trading!
After yesterday's crash Cardano has bounced back nicely. But when we look at the waves in smaller timeframes we can see that these are not impulse waves. This should give us a warning sign that we are not out of the woods. Looking at the bigger picture, a 5th and final wave down is possible!
Levels
The VPVR indicates resistance volume at $1.47 and upwards.
Averages
The 21 MA is heading down towards the same area. Currently the 200 MA provides support, but price has not touched it yet.
Waves
If we follow the current count, we can (unfortunately) assume that the 5th wave is still to come to complete the entire consolidation. If we extend targets, the $0.93 area shows confluence. If you zoom out, this is also the upper trend line of the channel (switch to Weekly to see it).
How likely is another breakdown?
This also depends on how crypto correlates with DXY and the Nasdaq. The dollar has shown a reversal and a strong follow-up. Another surge in dollar strength can be dangerous for crypto and lead to this final breakdown. If the dollar remains weak, I expect that ADA will not break down but range instead with a slightly bullish angle.
How to tell when ADA breaks down?
Wave 4 corrections are typically not very deep. If ADA moves up further from here - especially above the green line "bullish confirmation", the wave count is invalid. That means a breakdown is likely avoided and the entire correction is complete.
How to trade it?
A short entry (SE) inside the red box can be attempted. If ADA moves up and out of the box, the position should be exited and we switch to a bullish bias.
Happy trading!
Trade active:
Entry idea for the short trade:
Trade closed: stop reached:
Because the bearish count seems invalidated, we can assume that we have started a new uptrend and are currently in a wave 2. Likely we see more ranging to build a consolidation base before we head higher in a wave 3.