Polkadot needs assurance on these counts before making a new ATH

By November 1, 2021Polkadot
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Polkadot’s rising wedge was coming to a conclusion following tepid price action over the past two weeks. With bearish divergences spotted on the RSI along with unfavorable readings on the MACD, DOT stared at the barrel of a 30% sell-off towards the $28.5 mark.

To change the tide, bulls would need to carry DOT’s 24-hour surge above a supply zone of $46.3-$49.5. Until then, chances of a retracement cannot be discounted. At the time of writing, DOT traded at $45.3, up by 9% over the last 24 hours.

Polkadot Daily Chart

Source: DOT/USD, TradingView

Polkadot’s rising wedge began to take ship since late August after the price maintained its streak of higher highs and higher lows heading into November. However, the pattern is usually susceptible to breakdowns once investors cash out their gains.

In DOT’s case, an overhead resistance of $46.3-$49.5 posed a similar threat should a majority of investors indulge in profit-taking. If so, DOT would be exposed to a 30% decline from the breakout point, based on the highest and lowest point within the pattern.

Bulls can look to provide countermeasures at a defensive area of $28.5-$29 and reignite momentum for a fresh rally. Once earlier swing highs of $34 and $36 are overturned, DOT can set its sight to $40.

On the flip side, an early close above $49.7 could prove to be a catalyst for additional gains. A breakout in the opposite direction would see DOT surge towards its target close to the $65-mark.

Reasoning

Unfortunately, the combination of DOT’s daily RSI and MACD lent weight to an unfavorable outcome. A series of lower peaks along the RSI identified a bearish divergence with respect to DOT’s price action. MACD’s bearish crossover could also generate additional selling pressure in the coming days.

Conclusion

DOT could suffer a 30% sell-off should the price break south from its rising wedge. Traders can capitalize on this development by shorting DOT below the $40-mark. Take-profit can be set within a strong defensive zone of $28.5-$29.5 , with a stop-loss at $50.

Meanwhile, bulls could hope that DOT’s 24-hour surge can carry it beyond the $50-mark. This would negate DOT’s wedge and allow further gains to accumulate.

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