Cardano (ADA) has started painting a bearish continuation pattern on its longer-timeframe charts, raising its likelihood of undergoing a major price crash by August.
ADA price in danger of a 60% plunge
Dubbed the “bear pennant,” the pattern forms when the price consolidates inside a range defined by a falling trendline resistance and rising trendline support after a strong move downside. Additionally, the consolidation moves accompany a decrease in trading volumes.
Bear pennants typically resolve after the price breaks below their trendline support and, as a rule, could fall by as much as the height of the previous big downtrend, called a “flagpole,” as illustrated in the chart below.
ADA/USD three-day price chart featuring “bear pennant'”setup. Source: TradingView
As a result, a decisive breakdown below ADA’s bear pennant structure could mean extended declines to the level at length equal to the flagpole. In other words, the target for Cardano’s price will be $0.20, down over 60% from June 28’s price.
In the meantime, ADA shows signs of consolidating inside the pennant’s range with its imminent bias looking skewed toward bulls. This opens the door for ADA/USD to rebound from the pennant’s rising trendline support near $0.46 to rally toward its falling trendline resistance around $0.60 by July.
Cardano’s Vasil hard fork
Despite the interim bearish outlook, Cardano could get a boost from its upcoming “Vasil” hard fork.
The upgrade, originally scheduled for June end, will now go live sometime in July and aims to improve the Cardano network’s speed and scalability.
In addition, Vasil is expected to make Cardano more developer-friendly, which proponents argue could even attract projects from rivaling layer-one blockchains, leading to a higher demand for ADA.
ADA’s price has a history of rising in the days leading up to Cardano hard forks, which should boost its chances at a rally alongside favorable technicals, as shown below.
ADA/USD three-day price chart featuring ‘bear pennant’ setup. Source: TradingView
What’s more, ADA also has a history of plunging hard after its hard forks in a sell-the-news fashion.
Thus, Cardano could be setting up to resume its downtrend after Vasil goes live in July, which would fall in line with the bear pennant discussed above.
ADA/USD and Nasdaq’s weekly correlation coefficient. Source: TradingView
At the same time, Cardano’s price remains almost in lockstep with U.S. equities amid the Federal Reserve’s interest rate hiking, which should continue to put downward pressure on its price in the short to medium term.
Source: Cointelegraph
