Cardano (ADA/USD) is experiencing a significant correction after completing a sharp upward movement that saw the cryptocurrency surge to $0.86 in early May.
Currently trading at around $0.79, ADA is attempting to stabilize above the 38.2% Fibonacci retracement level at $0.77, a critical support zone that may determine whether this pullback is merely a healthy correction or the beginning of a more substantial decline.
Cardano Retracement Taking Place
Price action on the chart shows Cardano has formed what appears to be a V-shaped recovery pattern since early April, breaking through several resistance levels before peaking in the second week of May.
This impressive rally saw ADA gain nearly 35% before bears stepped in to force a retracement. The sharp upward trajectory followed by the current pullback suggests that profit-taking has emerged after the cryptocurrency reached its recent high.
Price is currently hovering between the 38.2% retracement at $0.77 and the 50% level at $0.75, indicating that buyers are attempting to defend this zone. Should this support fail to hold, the next significant level would be the 61.8% Fibonacci retracement at $0.72, which coincides with the area where the recent breakout occurred.
The long-term ascending trendline that has supported Cardano since early April remains intact, suggesting the overall bullish structure hasn’t been compromised despite the recent correction. This trendline, combined with the major psychological level at $0.70 that has served as previous resistance forms a strong support confluence that should provide a solid floor if further downside materializes.
Cooling Momentum Indicators
The moving average configuration on the Cardano chart reveals a bullish alignment, with the blue 100 SMA positioned above the red 200 SMA. Both moving averages are sloping upward, which typically indicates a healthy uptrend. However, ADA has retreated to test the blue MA, suggesting the pullback has reached a potential support zone. How the price reacts at this junction will likely determine the next directional move.
The stochastic oscillator has retreated from the overbought territory and is currently heading lower, indicating that bearish momentum is still in play for the short term. However, the oscillator is approaching the midpoint of its range, suggesting that selling pressure may begin to diminish soon. Traders should watch for potential bullish divergence or a turn upward from the current levels, which could signal a resumption of the uptrend.
Meanwhile, the MACD indicator in the middle panel shows the blue line has crossed below the orange signal line, with the histogram bars turning negative. This confirms the bearish momentum in the short term, although the recent diminishing size of the red bars suggests that selling pressure might be waning. This potential weakening of bearish momentum could set the stage for a turnaround if support levels hold firm.
Looking ahead, traders should closely monitor the key Fibonacci support levels for any signs of a bounce. The 50% retracement at $0.75 represents the next critical support if the current level fails to hold, followed by the major psychological level at $0.70 close to an ascending trend line and a former resistance zone.
