Disclaimer: The findings in the following discussion are the sole opinions of the author and should not be considered investment advice.
Unable to form a new high above $ 38.7, Polkadot was seeing another leg south on the charts at press time. A close below the 38.2% Fibonacci level would allow the DOT to hit a new low around the $ 20 mark, thus opening a path to $ 17 and $ 10.3.
At the other extreme, the bulls would look to respond immediately at the 200-SMA (green) to avoid an extended sell-off. At the time of this writing, the DOT was trading at $ 28.9, down 6.2% in the past 24 hours.
Daily graph of Polkadot
While some alts have gone astray since mid-August, the same cannot be said for Polkadot. The alt continued to reach higher highs in September, supported by steady flows in a constantly expanding ecosystem. However, its movement on the chart seemed to come to a disturbing end.
After recovering from the 38.2% Fibonacci level, the DOT was unable to create a level above $ 38.7. Additionally, a possible head and shoulders pattern was forming – a bearish setup that often results in a collapse below the “neckline” ($ 25.4).
If sellers respond to such signals, the DOT would be under threat of another selloff towards the $ 20 mark. From there, the July levels of $ 17 and $ 10.3 would be the center of attention.
There was not much for the bulls to do. The zone between the 200-SMA and the 38.2% Fibonacci level would be the best bet for an immediate U-turn. However, such a move would require the support of the market in general.
Three lower peaks on the Awesome Oscillator suggested a bullish weakening in the market. An increase in sales pressure generally follows after such readings. This trend was also seen in the Relative Strength Index, as it threatened to move further into bearish territory.
Finally, the MACD continued to trade bearish and attracted more selling pressure.
A head and shoulders formation threatened a huge sell-off in the DOT market. Traders can wait for the DOT to close below the 38.2% Fibonacci level and then take short positions.
Take profit can be set at the 23.6% Fibonacci level. This would represent a 23% profit for short sellers.
This is a machine translation of our English version.