Cardano (ADA) wiped out much of the weekly losses suffered during the cryptocurrency market era this week.
ADA’s intraday price rose $ 0.60 on May 13, a day after breaking the weekly low of $ 0.38, up 58%.
The huge rise in heels of similar price action in the cryptocurrency market came, with major cryptocurrencies Bitcoin (BTC) and Ether (ETH) bouncing 23% and 25.75% from their highs yesterday.
But the strong rally in ADA does not guarantee that the basics will continue, at least according to three such factors discussed below.
The stock market crash is far from over
First, Cardano’s price action and similar cryptocurrencies are in line with US equities, especially tech stocks.
In particular, the correlation coefficient between ADA and high-tech-heavy Nasdaq Composite on May 13 was 0.93 May, making any major transfer of Cardano stock likely to pull in the same direction.
In addition, the Nasdaq is unlikely to see a major rally at the moment as analysts suggest that Big Tech stocks are overvalued and are more likely to fall further in a higher interest rate environment.
“The backbone is quite high above the high-tech companies,” says Richard Waters, West Coast editor of the Financial Times, who said:
This is where valuations are most pressing and the market is struggling to thrive. »
In other words, Cardano’s continued positive correlation with the Nasdaq could lead to sharper declines in the ADA market, at least for some time.
The “missing fifth wave” of the ADA
Secondly, another hint of a possible Cardano price fall comes from a technical pattern highlighted by Capo of Crypto, an independent market analyst.
The analyst called this pen name Note that ADA could fall into the $ 0.30-0.35 range, taking into account that the fifth and final wave of Elliott Wave’s bearish settlement could be reflected, as seen in the chart below.
The target zone coincides with the January 2021 support zone which came before 850% upside down.
Breaking the descending channel
Third, Cardano broke below its multi-month downward channel in another sign of weakness.
ADA’s downward trend came within a range defined by two parallel falling trend lines, highlighting the traders ’current strategy of buying near the lower trend line and selling towards the better trend line.
But on May 12, ADA / USD broke below the lower trend near $ 0.568, indicating that traders ignored the buying opportunity.
Instead, buyers came close to the $ 0.378 level to accumulate ADA, causing the price to bounce back as seen above. However, the volume of trade that supported the rally move was weaker than during the sell-off, reflecting a weakening of the rebound trend.
At the same time, the upward move showed additional signs of weakness after testing the low of the descending channel as resistance, a way to confirm the breakout. If bulls fail to flip the price cap back towards support, the probability that ADA will continue its current reversal will be much higher.
Read also: Watch out for fall! Ethereum derivatives data suggest a further decline in ETH
Conversely, a decisive move above the bottom trend line of the channel could allow ADA to test its upward trend near $ 1.
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