According to crypto analyst Ali, Cardano has been trading inside a rising parallel channel since the end of June.
A rising parallel channel (or ascending channel) is a bullish technical analysis chart pattern that emerges when the price of an asset moves upward between two parallel diagonal lines. This is a controlled uptrend as buyers are slowly pushing prices up, but sellers are taking profits at resistance and creating temporary pullbacks. This pattern, though bullish, can carry bearish reversal risks depending on how the price breaks.
During the period when ADA traded within the rising parallel channel pattern, ADA rose from a low of $0.138 to a high of $0.282.
Cardano now faces a critical test: Ali observed that it appears that Cardano might have broken below the channel's lower boundary, signaling the possibility of a deeper correction.
According to the technical setup, the $0.220 level has emerged as a key resistance zone, and as long as this level holds as a barrier, ADA could face a roughly 20% decline toward $0.166.
What indicators say
In a separate X post, Ali cited a few signals that might suggest that Cardano could be eyeing a major move, possibly downward.
According to Ali, historically, changes in the holdings of whales holding 100 million to 1 billion ADA have often coincided with major moves in Cardano's price. But their holdings have been relatively flat for the past 10 days. So far, these large investors are not showing a clear directional bias.
The ADA chart, however, is flashing a warning as Cardano's SuperTrend indicator has flipped bearish. The last comparable signal appeared on May 22 and was followed by a 46% correction. That doesn't mean history will repeat, but it makes the current signal worth watching.
This could spark a decline to $0.21, the lower boundary of Cardano's rising channel. A daily close below it would signal a breakdown and send ADA to $0.17.
At the time of writing, ADA was down 4.03% in the last 24 hours to $0.20 amid a broader crypto market drop. The cryptocurrency is down 6.05% weekly, entering its third day of decline since October 21.
In positive news, a public Dijkstra testnet has gone live, advancing testing for Cardano's next major upgrade.
