Cardano (ADA) is trading at $0.35 at the time of writing, after gaining 3% in 24 hours. In fact, ADA has been on a tear lately, as its price has dropped 16% in just the past 14 days.

The 1-day chart shows that the bearish trend may continue. This comes after Cardano formed a head and shoulders pattern, signaling that the price may enter a downtrend. As such, the rally that pushed ADA up more than 26% in late September is weakening. Accordingly, bears may start selling, pushing the price lower on the chart.

Source: Tradingview

Such a bearish bias would be confirmed if ADA breaks below the neckline of the pattern at $0.34. The price attempted a bearish breakout on October 9, before the bulls returned to the market.

If it fails to hold above this neckline, the price risks an 8% drop to test the $0.31 support. For ADA to invalidate this pattern and resume the uptrend, it must break above the $0.36 resistance.

Technical indicators show this.

At the time of writing, technical indicators are showing recent bearish momentum. The Relative Strength Index (RSI) is at 44, implying that sellers are in control.

This bearish momentum looks strong as the RSI line slides below the signal line.

Source: Tradingview

The MACD line is negative and continues to trend below the signal line. This further strengthens the bearish scenario for Cardano’s altcoin.

ADA may continue to trade sideways due to a group of liquidations above the price at the time of writing. Such a “hot” liquidation zone often tends to act as a strong resistance level.

Source: Coinglass

When there is more liquidation above the price than below it, it shows that Short positions are dominating the market.

Therefore, if Cardano breaks above this zone, it could force Short traders to close their positions, creating buying pressure and reversing the trend to the upside.

Profitable Cardano Wallet

Finally, data from IntoTheBlock reveals that after Cardano’s bull run reached exhaustion in late September, “In The Money” wallets dropped from 34% to 16% at the time of writing.

At the same time, hole wallets jumped from 63% to 78%.

Source: IntoTheBlock

The decline in wallet profits could trigger further price drops for ADA, especially if holders choose to sell to mitigate losses.

However, the sentiment around ADA remains positive and this could prevent a sharp drop. For example, the Long/Short Ratio has spiked to its highest level since early September. This could be seen as a sign that traders are betting on future price increases.

Source: Coinglass

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