In the following days, Cardano(ADA) might rally by almost 30 percent owing to a potential “triple bottom” setup which is a classic bullish reversal pattern. Although ideally speaking, it is the perfect scenario, its results after passing through the filter of reality can be quite unpredictable.
What Is a “triple bottom” setup
“Triple Bottom,” which comes after a downtrend, is a bullish reversal pattern, consisting of three consecutive lows. Basically, it implies that the sellers are unable to break below a particular specific support level after three back-to-back attempts. This creates a favorable situation for the buyers to take up the steering wheel. Ideally speaking, if everything goes as per the plan, which is rarely the case, the instrument will be able to retrace to the “neckline” which is the term given to the higher level which is a bridge between the highs which are results of the previous rebounds. This is made possible by the buyers’ return to the market. This entire process is followed by yet another breakout where the price is taken to a further high level with as much distance possible between the bottom and neckline of the pattern.
As of now, ADA’s price has managed to attain the triple bottom, halfway, following a rebound after the third low as shown in the chart below. Let’s take a look.
It is apparent that the rebound had considerable support from the buyers since the chart indicates that the price reversed is paired with a notable increase in trading volume.
The next question will be concerning the starting point of this potential scenario. Earlier this year, ADA witnessed a record high on the 2nd of September amounting to a total of $3.16, following which the price fell by almost 60 percent. Another cause of accumulation is the worst performance of the Cardano token in comparison to its major rival, Ether. While Ether witnessed 15 percent gains, Cardano dropped by 45.50 percent. ADA’s price drop in addition to its RSI being pushed into the oversold territory by the multi-month selloff might have directed it to the “accumulation area” as depicted in the chart given below. Let’s take a look.
The RSI and the accumulation area are also indicators of the buying scenario. Hence, it backs the triple bottom scenario on the four-hour chart.
The Risk Factor
In the last 24 hours, ADA has witnessed a price drop of 5.50 percent. The same is true for other crypto assets like Bitcoin and Ether as well. The United States Federal Reserve’s two-day policy meeting is one of the major reasons for the decline. It is expected that the meeting will lead to the U.S Central Bank deciding to accelerate the tapering of its asset purchasing program. As we know, it is one of the crucial factors that led to the crypto and stock market rally since the year 2020. The meeting will also consider increasing the rates, putting a halt on yet another factor i.e, cheaper lending which led to the high market prices. While the meeting is in progress, ADA is all set to test $1.18 as its weekly support, keeping in view a potential price rebound. If the plan doesn’t work out and ADA fails to rebound, closing below $1.18, the results will be anti-climatic.