- Cardano finds stiff resistance at the $0.4 area
- The price action has trouble overcoming the neckline of an inverse head and shoulders pattern
- $0.6 is the next logical target
Cardano (ADA/USD) has struggled to trade above $0.5 for a while now. Every attempt is met with selling orders, but the price action gives hope to investors.
After bottoming at the end of last year, ADA/USD rallied from 0.25$ to over $0.4, together with other leading cryptocurrencies. The bear market is over; claimed bulls!
But any bullish trend is made up of a series of higher highs and higher lows. Also, consolidations are common. It means that investors must give the price action time to consolidate levels before breaking important support or resistance areas.
In this case, the $0.4 area acts as a major resistance. It is the neckline of an inverse head and shoulders pattern with a measured move targeting the $60 area.
The measured move of an inverse head and shoulders points to $0.6
An inverse head and shoulders pattern is a bullish reversal one. As such, it appears at the bottom of bearish trends.
One of its main characteristics is the speed of the price action rallying from the lowest point in the head area to the neckline. This rally coincides with the rally that the cryptocurrency market posted in early 2023.
The first area to provide some resistance should be the pattern’s neckline. $0.4 was the area, representing, therefore, the neckline of the inverse head and shoulders pattern
At this point, the focus sits on the measured move. ADA/USD should rally to the $0.6 area on a clear break above the neckline. That is the minimum distance the market should travel to confirm the bullish reversal pattern. On the flip side, a drop below $0.25 would invalidate the bullish reversal pattern.