This article provides a technical analysis of Polkadot (DOT), examining the daily and weekly charts to identify key support and resistance levels, as well as assessing the sentiment in the market.
Polkadot (DOT) has experienced some significant bearish price movements in recent months, and it is important to examine the technical aspects of the charts to gain insights into its future direction.
In this technical analysis, we will focus on the daily and weekly charts of DOT, identifying key support and resistance levels and assessing the overall sentiment in the market.
Daily Chart
On the daily chart, we observe that DOT is currently losing the ascending support trend line that has been in place since the first week of May. This indicates a negative sentiment on the chart, and there is a possibility of further downward movement. The next important support level to watch is around $4.72. While it is uncertain whether DOT will drop below the December low, it is crucial to monitor this level as a breach could result in increased bearish sentiment.
Furthermore, the failure to break above the August 2022 high during the February rally demonstrates a lack of strength in the market. Considering this, there is a strong likelihood that DOT will retest the December lows around $4.26 and potentially go even lower.
Traders and investors should be prepared for this reality, as unforeseen events can lead to black swan events or flash crashes. However, it is worth noting that the current price below $6 presents a good opportunity for dollar cost averaging, especially for those who missed the December low.
Daily RSI
Examining the daily Relative Strength Index (RSI), we notice a major resistance trend line above the current price. Since April 2022, DOT has tested this resistance trend line multiple times, with only a fake breakout occurring in January 2023.
Each time the price reached this level, it quickly retreated. On the downside, a significant support block exists between 31.7 and 27.7, which has acted as support since April 2021. While waiting for a further drop in price, traders can anticipate a potential move to the upside once DOT enters this support block.
Weekly Chart
Turning to the weekly chart, we observe a massive resistance trend line that originated in November 2021. Rejections occurred in April and November 2022, but in January 2023, DOT finally broke out of this trend line, which served as a strong bullish signal.
Weekly Stochastic RSI
The Stochastic RSI on the weekly chart indicates that DOT is currently in oversold territory, with the index below 20. This suggests a significant buying opportunity, similar to the one observed between September 2022 and January 2023.
Weekly RSI
The weekly RSI reveals a resistance trend line that traders can monitor for a potential breakout. A break above this trend line would serve as a significant bullish signal.
Additionally, there is a substantial RSI support trend line, and it is noteworthy that the RSI is printing higher lows, indicating a healthy price action. In case of a pullback, traders can target the support trend line, which has provided bounces in July 2022 and December 2022.
Final Thoughts
Based on the technical analysis of Polkadot (DOT), the charts suggest a negative sentiment in the short term. There is a possibility of further downward movement, with key support levels to watch at $4.72 and the December lows around $4.26.
However, the current price presents an opportunity for dollar cost averaging. Traders should monitor the resistance and support levels on both the daily and weekly charts, as breakouts and bounces at these levels could indicate significant price movements.
Investors and traders are urged to remain vigilant and consider the broader market conditions and unexpected events that may impact Polkadot or any of the crypto’s price trajectory.