Cardano has been navigating a complex technical landscape, with price action recently breaking down from a prominent ascending trend line formation that had been building over several weeks.
Currently trading around $0.6966, ADA/USD finds itself at a critical juncture where the failure of this bullish pattern has opened the door for a potential retest of lower support levels, challenging the cryptocurrency’s recent recovery narrative.
The chart reveals a textbook ascending trend line that had been developing since early May, characterized by a series of higher lows meeting resistance at the $0.8437 level (100% Fibonacci extension). This pattern typically signals bullish continuation, making the recent breakdown particularly significant from a technical perspective.
From a Fibonacci standpoint, Cardano’s current position places it between critical retracement levels that could determine the next phase of price action. The ongoing pullback could test the nearby 38.2% Fibonacci level at $0.7297, followed by the 50% retracement at $0.7502 that lines up with the dynamic inflection points at the moving averages and a former double top neckline.
Growing Bearish Pressure
The momentum indicators are painting an increasingly concerning picture for Cardano bulls. The MACD appears to be rolling over from positive territory, suggesting that the bullish momentum that had been building during the triangle formation is now waning. This divergence between price action and momentum is often a precursor to more significant corrective moves.
The Stochastic oscillator has been cycling through various zones, reflecting the ongoing battle between buyers and sellers. Recent readings suggest that selling pressure has been gaining traction, with the oscillator spending more time in the lower half of its range. This technical development aligns with the triangle breakdown and reinforces the bearish bias that has emerged following the pattern failure.
In addition, the 100 SMA is starting to cross below the 200 SMA to suggest a turn in favor of Cardano bears. Note that price is already moving below both SMAs to signal that sellers are maintaining downside momentum after the break of the double top neckline support.
Critical Support Confluence
Looking forward, Cardano faces a crucial test as it approaches the confluence of multiple support levels around the $0.65-0.67 zone. This area represents the intersection of the swing low and significant psychological levels that have historically provided buying interest.
A decisive break below this support confluence could signal a more substantial Cardano decline that targets deeper retracement levels. Conversely, a strong bounce from these levels, particularly if accompanied by bullish reversal candlestick patterns, could suggest that the triangle breakdown was merely a bear trap designed to shake out weak hands before the next leg higher.
The technical setup suggests that Cardano is at a make-or-break moment where the response to current support levels will likely determine whether this represents a temporary setback within the broader uptrend or the beginning of a more significant corrective phase.
