Bitcoin’s tumultuous start on Tuesday was responsible for triggering a massive altcoin correction. Smart contract operator Cardano had to bear the brunt of trading outflows, recording a 13% correction over the last 24 hours – the highest among the top 10 coins by market cap. At the moment, two important questions are asked of its chart.
Will investors continue panic selling or is there a viable buy the dip moment? A few important regions of supply and demand were used to provide a reasonable suggestion.
Cardano Daily Time Frame
Historically, Cardano’s daily demand zone between $1.02-$0.90 has been a spectacular defense against bears. The zone had staved off multiple bearish attacks over the past year and two distinct bull run runs have emerged as a result – one between February-May and the other between July-November.
Naturally, there were some expectations of a bullish rebound when ADA tagged this zone on February 15. However, the latest correction is expected to dispel any kind of bullish speculations until a new demand zone is discovered.
This was because ADA’s zone between $0.90-$0.40 was devoid of liquidity and hence, no reliable support areas were available. The next logical defense only lay at $0.36, marking potential for an additional 53% decline in value.
With the said, bulls could create bases for buying at $0.80 and $0.68 or even $0.52 but uncertainties would remain until a chain of higher highs is established. Since no immediate buy zones looked enticing, shorting ADA was the safest course of action at the moment
Trading Strategies
When massive sell-offs take place, the market often bears witness to a dead cat bounce, which is temporary price relief. With 23 February’s swing low of $0.80 awaiting a retest, ADA could see a brief pick up to $0.90.
This opens the market to two situations. Investors begin shorting once ADA closes below $0.80. Take-profits can be set at $0.36 while stop-losses can be maintained at $1.02. The hypothetical trade setup carried a risk/reward ratio of 1.87.
The second strategy involves trading for a dead cat bounce. The RSI was trading in oversold territory and a BTC rebound from $36K can lead to a brief altcoin push. Long positions on ADA can be opened at $0.80 while take-profits can be set at $0.90. Stop-losses can be maintained at $0.68. Bear in mind that the trade setup was high risk and low reward, carrying a risk/reward ratio of 0.91.
Conclusion
It’s worth mentioning that there isn’t any clear buy the dip level for Cardano at the moment and shorting is be the safest trading strategy one can employ until ADA recovers above $1.00. However, a mini-rally cannot be ruled out and opportunities were present for both sides, albeit with different risk/reward ratios.