Cardano’s (ADA) price has experienced a remarkable surge of 140% in November, largely attributed to the political influence of Donald Trump’s reelection bid. However, recent technical indicators are pointing to the possibility that a significant portion of this rally could be erased in the coming weeks, potentially leading to a sharp decline of up to 40% by December.

Rising Wedge Pattern Signals Potential Breakdown

One of the key technical patterns that traders are keeping an eye on is a “rising wedge,” forming on ADA’s 4-hour chart. A rising wedge is a bearish formation where converging trendlines slope upwards, often signaling that an uptrend is losing momentum and could soon reverse.

If Cardano’s price breaks below the lower boundary of this wedge, it could trigger a correction toward the lower part of the pattern, which is projecting a price target near $0.598 in the short term. In a more extreme bearish scenario, ADA could fall as low as $0.513, which represents a 35% decline from its current price.

This potential drop is further supported by the decreasing volume accompanying the upward price movement. As ADA has risen in price, trading volume has been consistently waning, which often signals weakening market conviction. For traders, the volume reduction combined with the rising wedge pattern increases the likelihood of a reversal.

Bearish Divergence Adds to the Warning Signs

Further compounding the bearish outlook is the growing divergence between ADA’s rising price and the relative strength index (RSI), a popular momentum indicator. While Cardano’s price has been moving higher, the RSI has been showing signs of weakening momentum, falling despite the price increase. This is known as “bearish divergence” and is often a precursor to a market correction.

Currently, ADA’s RSI sits at 68, nearing the overbought threshold of 70. This suggests that the cryptocurrency is getting overextended, with a pullback potentially looming on the horizon.

Weekly Chart Supports the Sell-Off Scenario

Looking at Cardano’s weekly chart, the bearish technical setup appears to align with a potential sell-off. If ADA fails to break out above the wedge’s upper trendline with significant volume, the path of least resistance could point toward a deeper correction. A decisive breakdown could see Cardano testing support levels at around $0.476, a significant 40% drop from current levels.

Notably, ADA has faced strong resistance at the $0.90 level in the past, which coincides with the 0.236 Fibonacci retracement trendline. This level has acted as a distribution zone since early 2022, where ADA has previously dropped between 65-75% after testing it.

If history repeats itself, Cardano’s next major downside target could be its 200-week exponential moving average (EMA) at $0.476, forming a critical support level.

A Glimmer of Hope for Cardano’s Fundamentals

Despite the bearish technical outlook, there are some fundamental factors that may offer hope for ADA holders. Trump’s reelection has been a major factor influencing the cryptocurrency market in the past month, with the potential for more favorable policies for digital assets under his leadership. His administration has promised to avoid stringent crypto regulations, which could stimulate demand for cryptocurrencies like Cardano in the long term, especially in 2025.

While Cardano’s price faces significant technical hurdles, its fundamentals may provide some cushion against a steep decline. The promise of a more favorable regulatory environment in the future could lead to renewed interest in ADA, despite any short-term market corrections.

What Does the Future Hold for Cardano?

Cardano’s price movement over the next few weeks will likely depend on how the technical signals play out and whether the broader market sentiment continues to favor ADA. A breakdown below the rising wedge’s lower boundary could trigger a sharp sell-off, potentially erasing much of the recent Trump-inspired gains. However, if ADA can break through the wedge’s upper trendline with stronger volume, it may retest the $0.90 resistance level before any further downside is seen.

For now, traders and investors should be cautious, as the technical indicators suggest that Cardano may be approaching a crucial inflection point. With a potential 40% drop looming, it will be crucial to watch how ADA responds to the key price levels in the coming weeks.

Conclusion: A Risky Time for Cardano

In conclusion, while Cardano has enjoyed significant gains this November due to Donald Trump’s reelection, the risks of a sharp price correction loom large. Technical patterns and indicators are suggesting that ADA could erase 40% of its recent gains by December if the bearish trends continue. Investors should remain vigilant, balancing optimism with caution as they navigate the fluctuating market landscape.