Over the past few days, Polkadot (DOT) has formed a chart pattern that indicates a change in the price trend of the cryptocurrency. That is, the DOT appears to be reversing the decline and preparing a new appreciation through a bullish channel.
This movement, however, is not reflected in the short term, with the cryptocurrency registering a drop of 6% in last 24 hrs, quoted at US$ 7.10. For this trend change to take hold, the DOT needs to break the $8.00 resistance.
At the time of writing, the DOT has also seen an increase in its business volumes. Volumes grew by more than 35% to reach $370 million, according to data from CoinMarketCap.
Bull channel formation on Polkadot chart
The image above, which features the daily DOT chart, shows the cryptocurrency trading in an ascending channel. It is formed from two positive sloping trendlines drawn above and below a series of prices representing resistance and support levels respectively.
You can see that the DOT is forming larger tops and bottoms, the classic pattern of a bullish formation. Furthermore, the price has been able to hold the supports in the lower part of the channel, rejecting the bearish force.
According to this pattern, if the price starts to rise from its support level, with above-average volumes, we can expect a good bullish move. Otherwise, the price may not hold for long.
That’s why the volume data is important, because until now the DOT has not had a consolidated volume movement. Without a relevant volume, any appreciation can represent a false bullish signal, with no real input from investors.
Furthermore, Polkadot’s price analysis indicates the formation of a bullish harmonic pattern called “Bullish Shark”. This pattern combines Fibonacci with Elliott wave theory, and some new ratios like 88.6% are used.
Following the line of this pattern, if the price closes above a strong bearish candle, it will test the 88.6% Fibonacci, located in the $8.02 region. To confirm this trend, DOT needs to close the daily chart above $7.80.
With this resistance broken, Polkadot could reach the next level at $8.50, which is up 11.4% from the current price.
On the other hand, DOT is closer to the first bearish support located at $7.40. If the price closes the daily chart below this level, the DOT could drop as low as $7.10 – 5.7% below the current price.