I touched on Cardano’s point and figure diagram a little this morning during my cryptocurrency video, but I wanted to elaborate on it.
Above: Cardano (ADAUSD) $ 0.01 box size / 3 box reversal point and mapping table
The Cardano chart above is a $ 0.01 / 3 box reversal point and figure chart. I see two very clear and highly profitable setups on the long and short side of the market. There is clear evidence of consolidation in this diagram. This evidence is best illustrated by the frequent bull-to-bear and bear-to-bull market transitions (trend lines) since February 2020. Currently, the chart of Cardano shows us in a bear market. However, this could easily change. The buy stop level I identified is $ 1.28. This buy freeze is ideal as it would fulfill two bullish events. The first bullish event is the break of a double top that would form at 1.27 – this is the actual event that triggers a long. The second bullish event with the 1.28 entry is the break of the bear market trend line and conversion to a bull market. The initial profit target is 1.37 – but Cardano could climb higher very, very quickly.
On the short side of the trade, I identified a sell stop at 1.19. The entry at 1.19 would be after the break in the raised floor that would form at 1.18. This also creates a third lower low in a row. What would make this trading setup even more bearish and increase its positive expectation rate as a profitable trade would be the following scenario:
1.Cardano moves to the stop-buy entry at 1.28 or 1.29 and stops moving higher.
2. A new column of O-forms with a sales entry at the original level of 1.19.
If Cardano hit our buy stop at 1.28, but then backed up to hit our sell stop, it would create a point and figure pattern known as a bull trap. Bull trap patterns occur when a column with X creates a buy entry, doesn’t move over that entry, and then reverses to a column with Os. If the same column of Os starts a new short entry, we get a bull trap. Bull and bear trap patterns on a point and figure chart are among the most ideal and sought after patterns as the number of people trapped on the opposite side of the market causes significant price movements when the trapped traders are forced to leave their positions. If Cardano hits the buy stop at 1.28 and then goes up to 1.29 but not higher and then creates a new column of Os that generates a sell stop, we get a point and figure pattern called fake-out . Washouts are very similar to trap patterns, but they are more violent and generally move much faster than a standard trap. Like a trap pattern, the fake-out pattern traps many traders on the other side of the trade. What makes fake-out trading more dangerous, however, is the number of “late” buyers (in bull traps) and sellers (in bear traps) kicking a swing at the top and bottom. The participants in fake-out trades are often new traders who end up buying the wrong tops and shorting out the wrong bottoms. They are also the types of traders who hold on to losing trades for too long and are the final “push” of traders who leave a position when a fake-out pattern approaches its send.
Save money on your money transfers with TorFX, the 2016-2020 International Money Transfer Provider of the Year. Their goal is to connect customers with highly competitive exchange rates and unique service, whether they are trading online or over the phone. Find out more here.