This Chart Showcases Why Cardano Is in Correction Mode
Cardano (ADA) has followed the same path into a bear market as most other cryptocurrencies. However, based on the Elliott Wave theory, the entire decline from the September 2021 all-time high of $3.16 is not impulsive, but it’s corrective in nature. Below, we’re going to explore why that’s the case.
What is a Correction?
In Elliott Wave analysis, a correction is a price movement that goes against the dominant trend. For example, if the market is in an uptrend, then the correction can be called a bearish sequence.
In the case of Cardano (ADA), the correction is bearish, since the prior trend was bullish.
Elliott Wave Analysis
In Elliott Wave analysis, one of the most advanced principles states that corrective sequences unfold in 3,7,11 swing waves. On the ADA daily chart, we can count 7 wave price swings from the $3.16 high.
The first swing ended with the $1.81 low, which was followed by a bounce in the second wave swing. Down from the $2.40 high, the third swing wave ended at the $1.12 low. Another correction followed in the fourth swing wave, culminating with the $1.63 high.
The fifth swing wave ended at the February 24 low, and the correction upwards completed the sixth swing wave at the $1.24 high.
Short-term, the seventh wave can be called completed at the current low of $0.38. With the Relative Strength Index (RSI) oscillator breaking above the 50 mid-level, we have more confidence to call the correction finished.
Moving forward
As long as the $0.38 low remains intact, the entire price correction can be called finished. However, a break below the seventh swing wave will open the door for another 3 swing waves lower.
The nearest resistance levels are at $0.50 and $0.55. A break above these levels will likely push the price of Cardano towards $0.70, where the 50-day moving average is currently located.
