Cardano price is showing signs of recovery after months of downtrend. The four-hour chart shows ADA forming a bottom reversal pattern, indicating a downtrend reversal. Therefore, traders need to be very careful with how this formation turns out.
Levels ADA holders must follow
Cardano price formed an “Adam and Eve” pattern on the four-hour chart, implying that the trend could reverse. This technical formation includes a sharp valley (which looks like the letter V) followed by a rounded bottom, both of which are stuck under the horizontal resistance barrier. While these patterns are visually easy to spot, a confirmation is required for successful trading. The pattern can often continue to generate “double bottoms” and “double tops”, “multiple tops” and “multi bottoms”.
For ADA, the valley (the portion shown as Adam) was the result of a 10% drop. The recovery from this decline was also met by selling pressure that led to the formation of a round bottom (the portion shown as Eve). ADA faced selling pressure near $0.858 and failed to surpass it three times, making it a vital resistance level.
The technical formation in question predicts a 10% rise as determined by adding the distance between the high and low to the breakout point at $0.858. This, in turn, reveals a target of $0.938.
While theoretically this target makes sense, investors need to look beyond this level to find a more suitable place for buyers to build a local hill. $0.977 is one such level as Cardano price has formed multiple local tops around this barrier since Feb 21. Therefore, market makers are likely to push ADA beyond $0.938 to maintain remaining liquidity above $0.977. Afterwards, traders can wait for Cardano price to retest the $1 psychological level.
Besides, another indicator that supports this bullish outlook for ADA is the 180-day Market Value to Realized Value (MVRV) model. This indicator is used to evaluate the average profit/loss of traders who have purchased the ADA token over six months.
A negative value below 10% indicates that short-term holders are at a loss and typically long-term holders tend to save. Therefore, a value below -10% is often referred to as an “opportunity zone”. The 180-day MVRV for ADA is hovering around -34%, which indicates the oversold market situation. Additionally, this level was last seen in September 2020 and marked the start of a bull run for Cardano price, with a total gain of 4.147% in less than a year.
Finally, it is worth mentioning that if ADA price fails to hold above $0.825, it will create a lower low and invalidate the bullish argument.
Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, Koinfinans and the author of this content cannot be held responsible for personal investment decisions.