- Cardano took a 12.4% nosedive over the past 16 hours as the much-anticipated Shelley upgrade approaches
- Despite the mounting selling pressure, data reveals that the $0.12-$0.13 support level may hold
- Bouncing off this barrier could propel ADA to new yearly highs
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Several technical indexes suggest Cardano sits in overbought territory, but there is a robust support barrier that should allow Ada to rebound.
Strong Support Behind Cardano
Cardano is set to transition to a proof-of-stake consensus algorithm on July 29. As the Shelley upgrade approaches, investors seem to be cashing in their ADA. Mounting selling pressure led to a 12.4% correction over the past 16 hours.
From a technical perspective, the recent price action appears to be part of an ascending parallel channel where the smart contracts token has been contained since mid-March. Since then, each time Cardano has risen to the upper boundary of this channel, it drops down to hit the lower boundary. From this point, it bounces back up again, which is consistent with the characteristics of a channel.
Now that the so-called “Ethereum killer” has moved down to the middle of the channel, it presents an ambiguous outlook. ADA could either break below this support level and drop to the lower boundary of the channel or bounce off this hurdle to a new yearly high.
IntoTheBlock’s “In/Out of the Money Around Price” (IOMAP) model adds credence to the bullish outlook. Based on this on-chain metric, there is a significant support barrier ahead of Cardano that may prevent it from declining further.
Roughly 50,000 addresses had previously purchased over 6.8 billion ADA between $0.12 and $0.13. This massive supply wall could have the ability to absorb any downward pressure since holders within this range would likely try to remain profitable in their long positions.
On the flip side, the IOMAP cohorts reveal that there isn’t any major resistance that will impede Cardano from rebounding towards new yearly highs. However, the upper boundary of the ascending parallel channel previously mentioned may hold. This hurdle is currently sitting around $0.17.
It is worth mentioning that since March’s Black Thursday crash, Cardano gained over 780% because of intense speculation around the upcoming hardfork. For this reason, investors must remain aware that the recent price action could be a prime example of “buy the rumor, sell the news.”
Those who are betting to the upside must pay close attention to the support level mentioned above. Breaking below support could result in ADA taking a 13.5% nosedive towards $0.11.