Cardano (ADA) Suffers 20% Drop and Tests Key Support Levels Post Weekend Surge

Cardano (ADA) experienced a remarkable 60% price increase yesterday, triggered by Donald Trump's announcement regarding its inclusion in the US crypto reserve. This announcement propelled ADA’s price past the $1.10 mark, generating enthusiasm among investors.

However, following this surge, ADA has retraced below the $1 threshold, raising concerns about sustaining its gains. Traders are currently evaluating whether ADA can maintain its current levels or if it will enter a more pronounced correction. Understanding key support and resistance levels is crucial for determining the next course of action.

Increasing Selling Pressure Reflected in BBTrend

The inclusion of Cardano in the US crypto reserve significantly increased its market demand, causing its BBTrend indicator to leap from a deeply negative value of -14.5 to a positive 7.1 within hours. This shift highlights a change in momentum among traders. The BBTrend indicator, which is derived from Bollinger Bands, enables traders to assess price movement trends and volatility.

A reading above zero indicates bullish market conditions, while a value below zero signifies bearish sentiment. Extreme values, particularly those lower than -10 or above 10, often suggest an overextended move may be due for correction.

As of now, ADA’s BBTrend has plummeted back to -13.4, indicating that the initial excitement surrounding the crypto reserve inclusion has diminished. This quick decline suggests a notable weakening of bullish momentum, and ADA might soon face a period of consolidation or further retracement.

Directional Movement Index (DMI) Analysis

Another critical indicator, the Directional Movement Index (DMI), reveals that Cardano has shown a notable shift in trend strength. After the reserve announcement, the Average Directional Index (ADX) jumped from 28.3 to a robust 43.7, highlighting a strengthening trend.

While ADX values above 25 indicate an accelerating trend, those above 40 suggest a powerful movement, be it bullish or bearish. However, ADX does not give direction, only intensity, serving as an essential measure for evaluating the likelihood of trend continuation.

ADA's positive directional index (+DI) has fallen from a previous high of 66.5 to 41, indicating cooling bullish momentum. In contrast, the negative directional index (-DI) has risen from 4.7 to 14.1, suggesting that sellers are gaining traction. The combination of a strong ADX alongside a declining +DI and increasing -DI indicates a potential shift where bullish influence is fading, allowing for a possible deeper market correction unless buying activity ramps up.

Implications for Cardano’s Price

After yesterday's impressive rally, Cardano’s price is currently back around the $1 mark due to the fading frenzy. Technical indicators such as DMI and BBTrend point toward a weakening uptrend, raising questions about the asset's ability to sustain its position.

If ADA fails to uphold its current levels amidst growing selling pressure, it could test critical support around $0.90. A breakdown below this level could induce further declines potentially reaching $0.81 and as low as $0.65 before serious support kicks in.

Conversely, if bullish sentiment returns, Cardano could aim for a higher resistance level around $1.16. A successful breakout above this area may signal renewed strength, potentially driving the price to $1.32, a level not seen since early December 2024.

The future trajectory for ADA hinges on market reactions to recent activities, specifically the ability of buyers to overpower emerging sell pressures and drive the price upward.