Why could ADA increase by 22%?

• Cardano retests key support level around $0.364; The bullish momentum can continue if it holds.
• ADA’s long-short ratio is above one, supporting a bullish picture.
• A daily candle close below $0.342 would invalidate the bullish thesis.

The price of Cardano (ADA) is rising on Tuesday after falling more than 6% the day before. ADA is retesting a key support level, and if it holds, Cardano’s price could rise ahead. On-chain data supports the bullish thesis as more traders are betting on Cardano’s price to rise.

Cardono is poised for a rally if the key support level remains intact

Cardano’s price broke above a symmetrical triangle, a technical pattern formed by connecting multiple highs and lows with two converging trend lines (from late July to mid-September) on September 24 and rose more than 10%. Since Saturday, ADA price has bounced back and is approaching key support at $0.364, where the breakout level of the symmetrical triangle and the 50-day exponential moving average (EMA) roughly coincide, making it a key reversal point. At the time of writing on Tuesday, it is trading slightly above $0.380.

If the $0.364 level holds, ADA could rise 22% to retest daily resistance at $0.444.

The Relative Strength Index (RSI) on the daily chart has dipped, but is currently pointing higher, trading at 56, indicating a slowdown in bullish momentum. For Cardano to bounce back, the RSI would need to rise back above 60 for the bullish momentum to be sustained.

If the bulls are aggressive, the overall crypto market outlook is bullish, and Cardano closes above $0.444, ADA could extend the rally by 32% to reach the technical target of the symmetrical triangle (obtained by measuring the distance between the first daily high and the first daily low and adding it to the breakout point) at $0.590.

ADA/USDT Daily Chart

IntoTheBlock’s In/Out of the Money Around Price (IOMAP) further supports the bullish outlook. Nearly 133,350 addresses have accumulated 1.25 billion ADA tokens at an average price of $0.376. These addresses bought Cardano tokens for between $0.370 and $0.382, making it a key area of ​​support.

From a technical analysis perspective, the $0.364 level roughly coincides with the IOMAP findings, making this area a key reversal level to watch.

Cardano IOMAP chart

Furthermore, Coinglass’ Cardano long-short ratio highlights the possibility of a bullish reversal. The ratio stands at 1.10, the highest level in over a month. This report reflects bullish market sentiment as the number above suggests that more traders are anticipating the asset’s price to rise.

Cardano long-short ratio chart

Even though chain metrics and technical analysis support the bullish view, if the ADA daily candlestick closes below $0.342, the bullish thesis would be invalidated by creating a lower low on the daily chart. This development could send Cardano’s price down 11% to retest the September 6 low of $0.304.