Cardano Price Forms Bearish Divergence After 20% Hike — What It Means for ADA

Key Takeaways

• After a strong early May rally, ADA’s price has slipped 3.67% in the last 24 hours, now trading at $0.79.
• The CMF reading has dropped from 0.42 to -0.11, suggesting the altcoin’s buying pressure is fading.
• The earlier outlook for a $1 rally may be postponed unless buying volume and network activity recover.

Cardano (ADA) surged 20% over the past week, but bullish momentum is fading. In the last 24 hours, ADA slipped 3.67%, bringing its price to $0.79.

This pullback contrasts with the strong start Cardano’s price had in May. So, what’s next for ADA in the short term? Let’s take a closer look.

Cardano Chart Flashes Warning

On the 4-hour ADA/USD chart, Cardano’s price has been trading in an ascending channel since April 7. During this period, altcoin has hit higher lows and higher highs despite experiencing a slight downtrend.

Last Thursday, the Chaikin Money Flow (CMF) rose to 0.42, indicating substantial accumulation of ADA. Typically, such moves drive the price higher, and Cardano was no exception,  as it hit $0.85.

But today, things have changed. At press time, the CMF, which uses volume to measure buying and selling pressure, has seen its value drop to -0.11.

This decline indicates rising selling pressure and represents a bearish divergence compared to ADA’s recent price rally. Due to this setup, Cardano’s market value will unlikely see a quick run toward $1.

Instead, the altcoin might experience some consolidation before bulls come into the picture and trigger the upward trend again.

Doubts About the Short-Term Upside

Furthermore, a look at the price-Daily Active Addresses (DAA) divergence supports this outlook. As the name implies, the price–DAA divergence is an on-chain indicator that compares price action to the network activity on a cryptocurrency’s blockchain.

With the metric, one can identify whether the price is moving in a direction supported by user activity or not. When the metric’s reading is positive, it indicates that growing user engagement is enough to support a price increase.

On the other hand, when the price DAA divergence is negative, it indicates a drop in interaction with the cryptocurrency. At press time, Cardano’s price DAA divergence has dropped to -48.70, indicating a bearish trend with low user participation.

If this trend continues, Cardano’s price might retreat in its bid to retest $1.

ADA Price Analysis: Bullish Momentum Fades

Like the 4-hour view, the daily chart indicates a potential drop in Cardano’s price. Bollinger Bands have widened, signaling increased volatility.

Notably, ADA has touched the upper band of the indicator. Typically, when the lower band hits the price, it is a sign that the asset is oversold.

However, the reading indicates that ADA’s price has become overbought. As a result, the altcoin could experience a deeper retracement in the short term.

On looking at the Fibonacci retracement indicator, CCN observed that the current setup might lead ADA’s price to drop to $0.67 near the 00.236 pullback region.

However, should buying pressure increase and network activity on the blockchain rise, Cardano might breach the $0.85 resistance.

The coin’s market value might jump to $1.04 at the 0.786 Fib level in that scenario.