Above: Cardan (ADAUSD) Chart
I am writing this article at 1515 EST and at the present time, Cardano’s daily candlestick is printing an extremely bearish Japanese candlestick pattern: a Bearish Engulfing candlestick. A bearish engulfing candlestick pattern is a two candlestick pattern where the current candlestick’s body totally envelops/engulfs the prior candlesticks body. In other words, the open of the current candlestick is greater than the open of the prior candle and the close of the current candle is lower than the prior candle. At first glance, it may not look like this is the case, but if you read the OHCL (Open, High, Low, Close) values on the chart, you will see that Wednesday’s candlestick closed at 1.6288 and Thursday’s candlestick opened at 1.6293.
The above definition of a bearish engulfing candlestick is the traditional one as descrbied by Steve Nison in his book Japanese Candlestick Charting Techniques. However, there has been a lot of discussion in the technical analysis community regarding if the engulfing candlestick definitions should be applied the same way in markets that do not close from day to day – markets like forex and cryptocurrencies. For me, I like to augment the definition for a bearish engulfing candlestick in forex and cryptocurrencies to disregard the open being higher than the prior candlesticks body. Instead, I look for the current candlestick high to be at least within 50% of the range between the prior candlesticks body and the its high, which is the condition I currently see on Cardano’s daily chart.
So what does this mean for Cardano? The arrow (#1) on the chart points to where the open of the Thursday candlestick occurred and where the high of the day is at. There has been massive rejection higher near the daily open because of some powerful resistance levels in the Ichimoku system. The area points to the Tenkan-Sen at 1.6455, the Kijun-Sen at 1.7163 and Senkou Span B at 1.7024. It’s no wonder there has been a lot of difficult pushing Cardano any higher. Another indicator in the Ichimoku system that points to some continued weakness is the Chikou Span remaining below the candlesticks.
The oscillators on Cardano’s daily chart also point to continued weakness. In the RSI, when market is bullish and in a clear bull market the oversold levels are 50 and 40. Cardano has already been rejected against the 50 level in the RSI and is currently moving to test 40. Will Cardano bounce at the 40 level in the RSI? I don’t see that happening. The key trigger here for a confirmed drive south is if the %B crosses below 0.2. The %B is currently at 0.35 and pointing lower.
Be very careful with any bullish moves here. Cardano is now below the Tenkan-Sen, Kijun-Sen, Senkou Span A, and Senkou Span B. And the Chikou Span is in open space. The only support on the daily chart that exists is Senkou Span A below the Chikou Span at 1.2959. But the Kumo below the Chikou Span is small and that represents a weak area of support. Don’t be surprised to see a flash crash down to the 0.84 – 0.94 value area.