Cardano has been trading within a well-defined descending channel since mid-May, but recent price action shows bulls attempting to stage a recovery as the cryptocurrency approaches the upper boundary of this bearish formation.
With technical indicators turning increasingly positive, ADA/USD could be preparing for a significant move higher if it can successfully break out of the channel and the key $0.7500 barrier.
Channel Breakout Attempt
ADA/USD has been confined in a clear descending channel for over a week, with the price making progressively lower highs and lower lows until recently.
The cryptocurrency is currently trading at $0.7512, having bounced strongly from the recent low near the $0.7017 level. However, the channel top could keep gains in check and push Cardano back to the downside targets marked by the Fibonacci extension tool.
If so, ADA could set its sights on the 38.2% level at $0.7287 then the 50% level near the $0.7200 mark, followed by the 61.8% extension at $0.7120. Sustained selling pressure could drag price down to the 76.4% level at $.7017 close to the channel bottom and $0.7000 major psychological support then the full extension at $0.6851.
On the other hand, a move above the critical $0.7500 barrier could set off a climb to the next upside target at the 200 SMA dynamic resistance or the key $0.8000 major psychological resistance. Further gains past that point could reach the highs established earlier this month at $0.8407.
Improving Momentum Indicators
The technical indicators for Cardano are showing increasingly bullish signals, supporting the case for a potential breakout from the descending channel.
The MACD indicator (middle panel) has recently formed a bullish crossover, with the MACD line crossing above the signal line while the histogram bars turn green and grow taller. This suggests strengthening bullish momentum that could help drive prices higher in the near term.
The stochastic oscillator (lower panel) has already rebounded from oversold territory and is now rising steadily, confirming the building bullish pressure. Importantly, the stochastic has not yet reached overbought levels, suggesting there’s still room for the rally to continue before facing resistance from a technical perspective.
The moving average configuration presents a mixed but improving picture. While the 100 SMA remains below the 200 SMA – typically a bearish signal – both moving averages are beginning to flatten out, suggesting the strong downtrend may be losing momentum. Currently, the price is testing the 100 SMA from below, and a decisive break above this dynamic resistance would further strengthen the bullish case.
Volume analysis adds weight to the recovery narrative, with recent green candles showing increased buying volume compared to the selling volume on red candles. This volume divergence often precedes significant price movements and supports the case for a potential breakout.
Crypto sector developments and overall market sentiment could dictate directional flows for Cardano, as bitcoin and other major altcoins appear to be regaining some footing after earlier corrections.
