Cardano [ADA] has been on a steady rise in the past week, leveraging the rebound in the cryptocurrency market following recent Fed rate adjustments, as previously reported by CryptoCrypto.
Presently, ADA is trading at $0.4018, showcasing an 11.5% increase on monthly charts and a notable 13.73% surge in the last week, sustaining its bullish momentum after reaching a low of $0.303 earlier this month.
These market dynamics have generated a mix of optimism and doubt within the Cardano community, prompting varied reactions among investors.
Renowned crypto analyst Ali Martinez recently shared his skepticism through an analysis that hints at a forthcoming change in trend.
Assessment of Market Sentiment
Martinez highlighted the TD Sequential indicator, revealing a recent sell signal on Cardano’s daily charts, pointing towards a possible correction in the short term.
Typically, a sell signal on daily charts indicates an extended period of price increase, signaling a potential overextension in the market. This often prompts investors to consider taking profits or preparing for a reversal in price.
With this development, a short-term correction seems imminent for Cardano, possibly leading to a brief pullback before another upward trend attempt.
Interpreting ADA Charts
While Martinez’s analysis offers insights into ADA’s potential trajectory, examining additional indicators is crucial.
Notably, Cardano’s Price DAA divergence has shown a negative trend over the past week, with the current value at -45.63. A negative divergence suggests rising prices without a corresponding increase in active addresses, hinting at weakening demand or reduced market interest.
This scenario implies an impending bearish reversal, indicating that the price surge is unsustainable due to declining user engagement. As a result, a downward price correction is anticipated as the fading momentum is yet to be reflected in the price movement.
Moreover, retail traders hold a significant proportion of Cardano tokens, with 70.70% owned by this category, while whales and investors account for 8.95% and 20.34%, respectively, according to IntoTheBlock data.
This concentration of ownership among retail traders raises concerns as their emotional decision-making tendencies, such as panic selling or fear of missing out (FOMO), can lead to heightened price volatility.
Given that retail traders often follow trends and hype rather than long-term fundamentals, the market stability provided by institutional players and whales may be lacking, paving the way for potential price fluctuations.
While Cardano has enjoyed a notable surge recently, signs point to a possible pullback as the current fundamentals do not support a sustained rally. In the event of a correction, ADA is likely to retrace to a critical support level around $0.345.