Why Cardano weekly close could spell trouble to come

Cardano (ADA) price looks heavy and could drop like a stone next week as a few indicators signal warning lights. To make matters worse, the global sentiment is shifting back towards the same rhetoric it had at the beginning of the summer. The summer rally looks to end with several elements and tail risks coming back from a break.

ADA price could devalue by 80% in a worst-case scenario

Cardano price sees traders slowly but surely coming back to the office and picking up where they left off when they went into summer recess. Slowly but surely, more bearish effects are coming into play, and the summer rally looks heavy. ADA price is thus at risk of a collapse as it could set back its price action to square one for 2022 or even at new lows. 

ADA price, first of all, has been underpinned these past two weeks at $0.485, right below the monthly pivot held for a second week in a row for August. Thus far, the good news begins when the bad news begins, as no real bullish signals can be perceived from the weekly chart. Bulls were unable to make a convincing new high for August, while for two months, July still holds the record as the small trading range between highs and lows points to a breakout soon, which could fall in favor of the bears and see a drop towards $0.415 in a first phase, followed by a falling knife towards $0.075.

ADA/USD Daily chart

To the upside, a breakout towards $0.715 is still possible, although the 200-day Simple Moving Average and the monthly R3 are very bearish elements that will put a cap or limitation to further moves upwards. Bulls trading the upside must then keep this in the back of their minds that upside potential is limited, although the Relative Strength Index suggests otherwise. The biggest caveat is the dollar strength that could come back biting like a snake and scare away the bulls.