Cardano (ADA) has notably lagged behind its contemporaries in the ongoing crypto bull run. While Bitcoin has soared to new all-time highs, ADA, among a host of other altcoins, remains about 77% below its historical peak value. However, emerging technical patterns and market dynamics suggest this trend is about to reverse, with ADA potentially gearing up to close the gap.
Cardano Bull Flag Formation: An In-Depth Look
Central to this analysis is the bull flag pattern in the weekly ADA/USD chart. The bull flag pattern observed here consists of two main elements: the flagpole and the flag. The flagpole means a significant vertical price increase, which means a rapid increase in buying pressure. For ADA, this pool was formed from mid-October to mid-December and reflects an increase of approximately 185%.
The flag, which follows the pole, is a period of consolidation with a downward slope, resembling a flag on a pole. For ADA, the pool developed from mid-December to early February. A subsequent breakout above the flag can often lead to a price increase proportional to the height of the initial post.
Cardano price already broke out and surpassed the crucial resistance at USD 0.685. If ADA continues to follow this technical playbook, the rally is far from over. The expected target would be a 185% upside from the consolidation zone breakout point, which would bring the price close to the Fibonacci 0.382 retracement level, which is around $1.35.
Notably, Cardano price must first overcome the 0.236 Fibonacci retracement level at $0.92, an area where greater selling pressure and possibly shorter consolidation can be expected.
Golden Cross and more bullish arguments
The chart also shows the formation of a golden cross, a bullish signal where a shorter-term moving average (the 50-week EMA) moves above a longer-term average (the 200-week EMA). Such crossovers can often indicate a shift in momentum from bearish to bullish in the long term, and their significance is even greater on a weekly chart, which filters out short-term market noise.
Traders often view this crossover as confirmation of a trend reversal, with the potential to catalyze continued buying activity. For ADA, this could be the final confirmation of a strong bull move.
In addition, the weekly chart for ADA presents a broader story. The Relative Strength Index (RSI) is just above the overbought threshold of 74, indicating strong buying momentum with more room for upside.
The volume, while lower than during the peak periods of 2021, is consistent, indicating stable interest in ADA trading without the panic sell-off seen during sharp declines.
Additionally, a series of exponential moving averages (20 weeks, 50 weeks, 100 weeks, and 200 weeks) provide further context as ADA trades above all of these averages. Notably, the 200-week EMA has recently acted as a very strong support for the price, indicative of long-term bullish sentiment.
The 50-week EMA is trending upwards, which could strengthen support levels in the medium term. The 100-week and 200-week EMAs are further below the current price and could potentially serve as long-term support levels in the event of a price recovery.
Additionally, the Fibonacci retracement levels, drawn from the all-time high to the ADA bear market low, provide long-term price targets. After the conclusion of the bull flag, the 0.5 level at $1,697, which marks the midway point of the previous swing from high to low, could serve as another target for the bulls. After that, the 0.618 Fib at $2.04, the 0.786 Fib at $2.54 and finally the all-time high at $3.17 would be next price targets.
In conclusion, while the bull flag and impending golden cross are the stars of the show, other factors such as moving averages, RSI and Fibonacci levels add depth to the bullish story for Cardano price.
Featured image from Shutterstock, chart from TradingView.com
Disclaimer: The article is for educational purposes only. It does not represent NewsBTC’s views on buying, selling or holding investments and of course investing involves risks. You are advised to conduct your own research before making any investment decisions. Use the information on this website entirely at your own risk.