Cardano: A look into how traders can capitalize on this symmetrical triangle
An earlier article indicated that Cardano was taking shape within a symmetrical triangle and that a major price swing was due for the world’s third largest digital asset. This time around, specific price levels were identified for traders willing to long (or short) this setup once a breakout occurs. At the time of writing, ADA traded at $2.28, down 2.2% over the last 24 hours.
ADA 4-hour Chart
As highlighted earlier. ADA awaited a near 30% breakout in either direction based on the highest point at $2.43 and lowest point of $2.06 within the pattern. The 4-hour timeframe was also used in order to identify key swing highs and lows which could provide confirmation for a breakout. For bulls, a strong close above the confluence of 4-hour 200-SMA (green) and 7 October’s swing high of $2.37 would heighten chances of a favorable outcome.
Traders can take up long positions after this development and set their take-profits between $2.96-$3. Keep in mind that ADA would need to negotiate resistance zones of $2.58 and $2.80 in order to maximize gains. Meanwhile, stop-losses can be placed below 6 October’s swing high of $2.11.
On the other hand, a close below the 20-SMA (red) could extend to a breakdown from the pattern. Short-sellers can place bets once ADA slices below the $2-mark and set up a reasonable take-profit at $1.87, bagging gains of 7%. Even though a 25% breakdown would translate to a steeper take-profit for short-sellers, a risk-on broader market could prevent ADA from declining all the way to the $1.5 mark.
Now if ADA moves sideways between $2.31 and its 20-SMA (red) over the next week, chances of a breakout would severely diminish.
The Squeeze Momentum indicator suggested that upwards pressure was already creeping into the market. However, traders must refrain from taking positions till the index witnesses a ‘squeeze release’. Favorable readings were also present on the Directional Movement Index and the MACD.
Another area traders can keep a close eye on is over the 24-hour trading volumes. During an upwards breakout, spot volumes across exchanges generally register a considerable uptick. Conversely, volumes remain low during the onset of a breakdown.
Based on bullish readings on ADA’s indicators, bulls were favored to tip a breakout in their favor. The best-case outcome could even see ADA jump all the way up to $3 before any countermeasures are taken by the sellers. However, a bearish outcome cannot be discounted as well. Traders should keep an eye on the aforementioned indicators along with its trading volumes to get more clarity.
This article was first written on yusmid.com