Cardano (ADA) could rise almost 30% in the next few days, as it hints at the formation of a classic bullish reversal pattern.
There is a strong rebound in the price of ADA
Nicknamed “triple floor”, This pattern usually occurs at the end of a downtrend and consists of three consecutive lows printed at roughly the same level. This means that the triple bottoms indicate the inability of sellers to break below a specific support level in three consecutive attempts, ultimately clearing the way for buyers to take control.
In a “perfect” setting, the return of buyers to the market allows the instrument / asset to turn sharply towards a higher level, called the “neckline” (neckline), which connects the highs of the two previous bounces. The movement continues with a new breakout, this time taking the price higher as much as the distance between the bottom of the pattern and the neckline.
So far, ADA price has been able to draw the triple bottom halfway, now bouncing after hitting the third low, as shown in the chart below.
The timing of the ADA price reversing its direction was accompanied by an increase in trade volume, suggesting that the rebound had sufficient support from buyers. Hence, the Cardano token looks poised to at least keep climbing towards $ 1.40.
Also, if the price continues to break above the neckline level with determination, it is likely to keep rising to $ 1.63, based on the triple bottom scenario.
The possible triple bottom scenario appeared after the ADA price plunged more than 60% from its all-time high of $ 3.16 reached on September 2 of this year. It also came about as the Cardano network token became one of the worst performing token so far this quarter, falling almost 45.50% compared to the 15% gains of its main rival, Ether ( ETH).
ADA’s violent multi-month slide pushed its Relative Strength Index (RSI), an indicator of momentum, into oversold territory. What’s more, Cardano’s token price drop also pushed it into what looks like a reliable “stacking zone”, as shown in the chart below.
Both the RSI and the accumulation zone also point to a buying scenario in the ADA market, thus supporting the triple bottom scenario on the four-hour chart.
Risks remain for the ADA price
It is worth noting that ADA fell more than 5.50% in the last 24 hours, very in sync with other major crypto assets in the space, with Bitcoin (BTC) sinking more than 3% and Ether almost 5% in the same period.
At the center of the overall cryptocurrency market crash was the Federal Reserve’s two-day policy meeting that begins Tuesday. At the meeting, the US central bank will likely decide to accelerate the reduction of its monthly asset purchase program worth $ 120 billion, one of the main catalysts for the rally in cryptocurrencies and stocks since March 2020.
Elsewhere at the Fed meeting, officials would discuss the prospects for interest rate hikes next year from their current levels near zero. The cheapening of loans had also played an important role in the Market price momentum for Bitcoin and other tokens throughout 2020 and 2021, including Cardano’s ADA.
As Fed officials kick off their policy meeting, the Cardano token would be touching $ 1.18 as its weekly support for a potential price rebound. The $ 1.18 level is the 0.618 line of what appears to be an accurate Fibonacci retracement chart for predicting ADA support and resistance levels.
In case ADA fails to bounce and close below $ 1.18, its next Fibonacci support may come at the 0.786 line near $ 0.674, about 42% lower. Nonetheless, the ADA / USD pair could also visit the $ 1 level as psychological support for an early rally to the upside, similar to its multiple bounces between February and July 2021.
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