Cardano (ADA) price surged from $0.48 on May 30 to a high of $0.68 on May 31, a 45% rally in less than 48 hours. However, the ADA/USD pair failed to extend its rally to the upside and fell almost 13.75% from its weekly high.
ADA Price: Ear Market Vibrations
Cardano price pulled back sharply on June 1, erasing a portion of the gains secured in the previous two days. The question is now being raised as to whether the ADA/USD pair can extend its recovery trend, especially as it trades almost 80% below its September 2021 high of $3.16.
Interestingly, the pullback started after ADA reached its 50-day exponential moving average (50-day EMA; the red wave on the chart below) as resistance. Additionally, the pair was lower along with broader corrective sentiment in riskier assets including Bitcoin (BTC) and the S&P 500 (SPX).
Now, the Cardano token risks a further price correction, according to Digital Trend, financial analysis contributor at SeekingAlpha, noting that ADA has seen strong price rallies in the past that turned into bull traps, adding:
“In March, we saw ADA go from $0.80 to over $1.24 in a couple of weeks. This, to me, looks like another fake-out.”
Several fundamental factors also support a bearish outlook. On June 1, the Federal Reserve will begin to reduce its $9 trillion asset portfolio, likely creating more headwinds for risky assets, including Cardano.
1/16
Today it begins.
Quantitative Tightening.
So what does it mean? Is it a straight down market? Do we know its all good if nothing bad happens the first day?
How do you navigate this?
— Adam Cochran (adamscochran.eth) (@adamscochran) June 1, 2022
Today begins.
quantitative hardening.
What does this mean? Is it a direct bear market? Do we know that everything is fine if nothing bad happens on the first day?
How do you go through this?
“I don’t think we know the repercussions of quantitative tightening yet, especially since we haven’t done this balance sheet reduction many times in history,” Dan Eye, chief investment officer at Fort Pitt Capital Group, told Market Watch, adding that the removal of market liquidity “would affect valuation multiples to some extent.”
Cardano price chart draws a bullish pennant
From a technical perspective, Cardano could continue its recovery trend in June due to a bullish continuation pattern.
ADA has been consolidating within what appears to be a “bull pennant”, confirmed by price fluctuating within a triangle structure after a strong move higher, called the “flag pole”.
A bullish pennant is usually resolved after the price breaks above its upper trend line and rises as high as the height of the flagpole.
That is, an upside target of $0.77 in June, that’s over 25% above the June 1 price.
The ADA/BTC pair could see a similar move higher
ADA has been painting a similar bullish pennant setup on its chart against Bitcoin, increasing the chances of an uptrend for the ADA/BTC pair in June.
As a result, the ADA/BTC pair’s decisive break above the pennant’s upper trend line could see it rally towards 0.00002355 BTC, up 23% from the June 1 price.
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