- Polkadot price trades inside a tight range above a critical support level of $3.98.
- The daily RSI produced a higher high, signaling a surge in bullish momentum and a potential breakout scenario.
- DOT needs to overcome the $4.31 hurdle to attempt a retest of $4.80 and higher levels.
- A daily candlestick close below $3.98 will invalidate the upward reversal thesis and could trigger a 7% crash to $3.70.
Polkadot (DOT) price seems to be ending its downtrend after shedding 92.91% in the last two years from its all-time high of $55.09. In the last three days, DOT has inflated by 3.3%, breaching a declining trendline and confirming the potential start of an uptrend.
Polkadot price coils up
Polkadot price is down 92.91% from its all-time high and currently trades in a tight range. The three lower highs and equal lows on the daily chart have created a descending triangle setup. Descending triangles, when formed after a rally or at the top of a trend, could result in a downtrend upon breakout. But since DOT is down 92.91% from its all-time high, the chances of a downward breakout are less.
Despite the bearishness of this technical formation, a closer look at the momentum indicator suggests otherwise.
The Relative Strength Index (RSI), which produced a series of lower highs since mid-July, has produced a higher high, breaching a declining trend line. The Awesome Oscillator (AO), has consistently produced higher lows since late August, indicating waning bearish momentum.
In the last three days, however, Polkadot price has breached the descending triangle's upper trend line and rallied 3.3%. This move now faces $4.20 and $4.31 hurdles. If the bullish momentum supports this move, then a reclaim of the said resistance levels would open the path for DOT to trigger an 11% rally to $4.80. In some cases, the altcoin could even tag the $5 psychological level.
DOT/USDT 1-day chart
While the optimistic outlook for Polkadot price sounds logical and possible, investors need to be cautious of Bitcoin. The pioneer crypto has a large swap on altcoins, including DOT. A sudden shift in trend or a sell-off in BTC could have a similar effect on altcoins.
In such a case, a daily candlestick close below the critical support level of $3.98 will create a lower low and invalidate the reversal thesis. This development could catalyze a 7% crash in Polkadot to revisit the $3.70 level.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.