Polkadot: How traders can leverage this pattern’s breakout to time entries

Please fol­low and like us:
Pin Share

Dis­claimer: The find­ings of the fol­low­ing analy­sis are the sole opin­ions of the writer and should not be con­sid­ered invest­ment advice.

The last two months marked a vis­i­ble bear show as they reit­er­at­ed their vig­or amidst the wider mar­ket sell-offs. On its way south, the 38.2% and the 23.6% Fibonac­ci lev­els have stood stur­dy by depriv­ing the bulls of a trend-alter­ing rally.

The cur­rent price struc­ture is an ide­al bear­ish set­up whilst the price action tight­ens between the bear­ish pen­nant pattern.

Any rever­sals from the 23.6% lev­el would expose DOT to a poten­tial down­side in the com­ing ses­sions. At press time, DOT trad­ed at $9.58, down by 7.84% in the last 24 hours.

DOT Daily Chart

Source: Trad­ingView, DOT/USDT

Gaug­ing the cur­rent Bit­coin sen­ti­ment, which only wors­ened over the last 24 hours, it could be prof­itable to have a con­ser­v­a­tive opin­ion on the mar­ket movements.

The recent retrace­ments pulled DOT toward its 16-month low on 12 May after a 55% week­ly decline (5–12 May). Since then, the grad­ual improve­ments on its troughs saw a nega­tion by the bear­ish peaks. Thus, form­ing a bear­ish pen­nant on the dai­ly timeframe.

With a rel­a­tive­ly steep flag­pole pre­ced­ing the pen­nant, the sell­ers seemed deter­mined to con­tin­ue their streak of low­er peaks. Also, dur­ing the pen­nant for­ma­tion, the vol­umes were on a declin­ing trend. More often than not, bear­ish pen­nants are more effec­tive dur­ing such a declin­ing trend.

With a con­flu­ence of the 23.6% lev­el, the 20 EMA (red), and the two-month trend­line resis­tance (white, dashed), DOT could aim to retest the $8.6‑support. Any fall below this mark would pro­vide fur­ther short­ing oppor­tu­ni­ties in the $7-$8 range.

Should the broad­er sen­ti­ment improve, a bear­ish inval­i­da­tion can lead to rel­a­tive­ly short-lived gains until the 38.2% level.

Rationale

Source: Trad­ingView, DOT/USDT

The RSI’s recent tra­jec­to­ry entailed a grad­ual growth. But its high­er peaks have bear­ish­ly diverged with the price action. Thus, rein­forc­ing the bear­ish edge in the near term. To inval­i­date this, the bulls need­ed to find a close beyond the index’s trend­line resistance.

Sim­i­lar­ly, the CMF joined hands with RSI to reit­er­ate the diver­gence. Any close below the zero-mark would affirm the bear­ish nar­ra­tive paint­ed above.

Conclusion

Look­ing at the bear­ish pen­nant set­up approach­ing the con­flu­ence of three hur­dles, DOT could face a near-term setback.

A close below the pen­nant would expose the alt for a test of the $8.6‑support fol­lowed by the $7.3‑zone. Should the bulls find renewed buy­ing pres­sure, a short-term ral­ly could see restric­tions at the 38.2% level.

Final­ly, an over­all mar­ket sen­ti­ment analy­sis becomes vital to com­ple­ment the tech­ni­cal fac­tors to make a prof­itable move.

Source link

Please fol­low and like us:
Pin Share

Leave a Reply

Your email address will not be published. Required fields are marked *