Cardano (ADA) has started to paint a bearish continuation pattern on its longer timeframe charts, increasing the likelihood of a big price drop in August.
ADA Price in Danger of 60% Drop
Nicknamed the “bearish pennant”, The pattern forms when price consolidates within a range defined by falling trendline resistance and rising trendline support after a strong move lower. Additionally, consolidation moves accompany a decline in trading volumes.
Bearish pennants are usually resolved after price falls below their trendline support, and as a rule, they could fall as low as the height of the previous large downtrend, called the “flagpole”, as illustrated in the graph below.
As a result, a decisive break below the ADA bearish pennant structure could mean a prolonged decline to the flagpole length level. In other words, the target for Cardano price will be $0.20, down more than 60% from the June 28 price.
Meanwhile, ADA is showing signs of consolidation within the pennant range with its imminent bias looking bullish. This opens the door for ADA/USD to bounce off the rising trendline support near $0.46 to rally towards its falling trendline resistance around $0.60 in July.
Cardano’s Vasil Hard Fork
Despite the tentative bearish outlook, Cardano could get a boost from its upcoming “Vasil” hard fork.
The update, originally scheduled for the end of June, will go live sometime in July and aims to improve the speed and scalability of the Cardano network.
Also, Vasil is expected to make Cardano more developer-friendly, which its proponents say could even attract rival blockchain projects, leading to increased demand for ADA.
ADA price has a history of rising in the days leading up to Cardano hard forks, which should increase its chances of a rally along with favorable technicals, as shown below.
Additionally, ADA also has a history of sinking long after its hard forks in order to sell the news.
Therefore, Cardano could be preparing to resume its downtrend after Vasil goes live in July, which would be in line with the previously discussed bearish pennant.
At the same time, the price of Cardano remains almost at the same level as US stocks amid the Federal Reserve interest rate hike, which should continue to put downward pressure on its price in the short term and medium term.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.