Recently, the price action of ADA has been striving to challenge long-term bearish movements. The 2023 rally played a significant role in helping buyers close the price above the daily 20, 50, and 200 Exponential Moving Averages (EMAs).
EMAs are a moving average that gives more weight to recent data points, making them more responsive to price changes. The 20, 50, and 200 EMAs are significant because they represent short, medium, and long-term trends, respectively.
This buying comeback propelled a close above the long-term trendline resistance, hitting the $0.45-$0.46 ceiling. The $0.24 baseline has remained solid for over two years, indicating the presence of long-term horizontal support levels. These support levels represent psychological barriers where market participants are unwilling to sell below. As a result, the price bounced back in 2023 by over 88% to hit the $0.44-$0.46 ceiling.
Following the trendline resistance break, bulls took control of the near-term market. Meanwhile, the price action formed a classic rising wedge setup (yellow). A rising wedge is a bearish chart pattern that occurs when the price consolidates, making higher highs and lows. This pattern indicates a potential reversal of the prevailing trend. Breaks from such wedges can confirm a breakout rally, suggesting an acceleration in price movement.
The 20 EMA (red) recently rose above the 200 EMA (green), but the subsequent pullback caused the 20 EMA to dip. A potential bearish crossover could confirm a bearish rebuttal in the market. The lower trendline of the wedge and the $0.38 support have coincided, providing immediate support to the price action.
The Relative Strength Index (RSI) has been hovering near the midline, implying a neutral market condition. Buyers should watch for a break above or below the 50-level before making near to medium-term decisions.
The Chaikin Money Flow (CMF) has dipped below the midline, reflecting a slight bearish edge. Any decline below the midline toward the CMF’s trendline support (white) can propel a bullish divergence with the price. A bullish divergence implies that the underlying buying pressure is stronger than the price movement suggests.
The 'Active addresses count' metric is vital for assessing network activity and user engagement. In the case of ADA, the active addresses count has gradually declined since the beginning of 2023. This downtrend could signal diminishing interest among users and market participants.
Despite the decreasing active addresses count, ADA's price has experienced a corresponding increase in 2023. This discrepancy suggests a bearish divergence, where the price increases while the underlying network activity weakens.
This price increase can be linked to ADA's Average Transfer Value (ATV) during 2023. The ATV represents the average value of transactions occurring on the network, providing insight into the strength of the underlying activity. An increasing ATV indicates that the network is processing more valuable transactions, which can contribute to overall price growth.
While the ATV and price of ADA have shown a resurgence in buying activity during 2023, the declining active address count has yet to confirm this trend. This discrepancy creates uncertainty, as the network activity doesn't entirely align with the price movement. Investors should closely monitor these on-chain metrics to understand ADA's market dynamics and potential future price action.
The price is currently near the EMAs, suggesting a period of low volatility. Consequently, a high volatility move may be imminent, which could define the coin's direction in the near term.
If the RSI and CMF indicators recover above 50, buyers could consider it a sign of a strong comeback and a possible trend reversal. In this bullish case, a sustained move above the $0.45 resistance could signal the beginning of a long-term recovery. Buyers would then aim to retest the $0.6-$0.7 levels in the upcoming months, indicating a positive outlook for ADA.
Conversely, a bearish scenario may unfold if the price closes below the critical $0.38 support level. ADA could enter a bearish price discovery phase in such a case, with the first major support level at $0.3. A decline to this level would signify increased selling pressure and a potential continuation of the bearish trend.
Considering the analysis, it is crucial to watch for a potential rising wedge breakdown that could hinder ADA’s near-term recovery chances. An eventual close above the current pattern can invalidate these bearish tendencies.
Nonetheless, investors need to track Bitcoin's movement, as ADA highly correlates with BTC. Ultimately, thorough research and consideration of individual risk tolerance should guide investment decisions. The Okto DeFi App offers a self-governed storage solution for ADA tokens while providing users a wide range of DeFi investment opportunities.