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Cardano short/medium-term price analysis: August 09

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Ethereum, Synthetix, Maker price analysis: August 27
Source: Pixabay

Trading at $0.145, Cardano is still the eighth largest cryptocurrency in the world, boasting a market cap of $3.66 billion. On a higher time frame, the coin has seen a surge of about 900% from March to July 2020. While this, in itself, is a staggering surge, ADA will be faced with another challenge soon.

Cardano’s weekly chart

ADAUSD TradingView

On a weekly time frame, the surge seems impossible to have happened in a bear market. However, stretching from March to July is a Fibonacci retracement tool that puts the current price just below the 50% level. Usually, surges or declines are met with resistance/support at this level; hence, assuming the 50% level will resist the price from heading higher, we can expect a small retracement.

Additionally, on the weekly time frame, RSI indicator has been oversold for over a month.

Hence, based on the two, a short position here wouldn’t be surprising. However, the same short position was called out in the previous article, perhaps, it was a little too early.

Cardano’s daily chart

ADAUSD TradingView

Regardless, a short position from the 50% Fibonacci level would be an apt place to start. Depending on one’s appetite for risk, the short position could yield a risk-to-reward ratio of 2.94 or 5.38 depending on where one wants to take profit.

The more conservative take-profit position would be at $0.1209, considering a two-week-long test of the level as support. However, if the coin does get run over by bears, then keeping the position open until $0.0921 wouldn’t really hurt.

Adding more credibility to this short position is RSI indicator, which clearly shows formation of a bearish divergence. The price formed higher high on July 08 and 27, whereas RSI formed a lower low.

Either way, Cardano’s price is headed down should it get rejected by the 50% Fibonacci level. Expecting a drop of 20-40% wouldn’t be a surprise, however, an important thing to keep in mind is the rejection at the 50% level. It would be cautious to wait for the price to breach/reject the said level and then retest it before entering the short position.

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Akash is a full-time cryptocurrency writer and an analyst at AMBCrypto. He is an engineering graduate with an avid interest in finance and economics. Attracted to the chaos of trading, Akash has invested in BTC, ETH and XRP for educational purposes.

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