Cardano (ADA) price broke the downtrend line and aims to reach $0.425. However, the short-term outlook is bearish due to the formation of a bearish pattern.
January may bring some of the most positive news for Cardano. Jedd, a collateralized stablecoin backed by ADA-backed cryptocurrencies, will launch this month. The asset will be subject to additional guarantees of 400% to 800%.
An exact release date has not been determined at this time. The Total Value Closed (TVL) has skyrocketed in the Cardano ecosystem, possibly in anticipation of the stablecoin’s launch.
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The price breaks the 256 days resistance
ADA has been under a downtrend line since May 2022. The token reached a low of $0.238 in December and has been rising ever since.
The price has been rejected by this line four times throughout the downward movement (red symbols). The most recent one occurred on January 14th. As the lines get weaker each time they are touched, the breakout finally occurred last Friday (20th) and reached a high of $0.387 two days later. If the current bullish move continues, the next resistance will be at $0.425.
At the time of the hack, the streak had been in effect for 256 days. Breakouts of these long-term structures often lead to large price jumps. Therefore, a move above $0.425 could intensify the current bullish trend.
However, there are mixed signals between technical indicators and price action. Despite the breach, the daily RSI is generating bearish divergence (green line). Also, it could drop below 70. Both are considered bearish signals.
Therefore, it is necessary to look at a lower time frame to determine whether the current bullish trend will continue.
Short term outlook for the ADA
Six-hour technical analysis indicates that ADA price is likely to correct before resuming its rise. The two main reasons for this are the creation of a parallel ascending channel, which is a bearish pattern, and the bearish divergence on the RSI (green line).
Currently, the price is at the channel resistance line. A dip below the center line could go a long way to signal a bearish breakout. This can happen within the next 24 hours. If ADA declines, it could reach the 0.5 Fibonacci retracement level at $0.313. This is also a horizontal support area.
In conclusion, the price of ADA rose significantly in January, possibly due to euphoria over positive news about its future stablecoin. However, the short-term outlook is bearish, which indicates that a correction may occur before the rally.
A breach below the parallel ascending channel will confirm this bearish scenario in the near term.
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