DOT Price Slides to New Yearly Low; Bearish Sentiment Still Strong
Polkadot (DOT) price is showing some bullish signs in the short-term. However, the long-term readings remain firmly bearish.
The weekly price chart shows that the Polkadot price has been decreasing underneath a descending resistance line since reaching an all-time high price of $55.09 in Nov. 2021. The line was validated once more in April 2022.
So far, the DOT price has reached a low of $5.68 on Oct. 13. The low was significant since it confirmed a breakdown from the $6.60 horizontal area. The area had previously acted as resistance in Aug. 2020 (red icon) before turning to support in July 2022 (green icon).
Now the area is expected to act as price resistance once more. It also coincides with the aforementioned descending resistance line.
Another important development is the bearish RSI reading. The indicator is below 50, is following a descending resistance line and has not generated any bullish divergence.
So, the outlook from the weekly time frame gives a bearish Polkadot price forecast. The most likely scenario would have the price decreasing towards the next closest support area at $3.90.
Conversely, a weekly close above the $6.60 horizontal area and the descending resistance line would invalidate the bearish hypothesis and suggest that a bullish trend reversal has begun.
Can DOT Price Initiate Short-Term Breakout?
The DOT price had been decreasing underneath a descending resistance line since reaching a high of $9.68 on Aug. 13.
On Oct. 4, the Polkadot price broke out from this resistance line. However, it failed to sustain its upward movement and decreased below its pre-breakout levels shortly afterward.
On Oct. 13, DOT reached a low of $5.68 but bounced immediately afterward (green icon), creating a long lower wick in the process. Still, the DOT price failed to sustain its upward movement and is currently trading at $5.95.
Despite the failure to sustain an upward movement, the daily RSI is bullish. The indicator has generated bullish divergence (green line) and also broken out from its resistance line (black).
While these are both considered bullish price signs, an RSI movement above 50 (green circle) would be required in order for the bullish divergences to be confirmed (green lines).
Therefore, while the price action is still bearish due to the creation of successive lower lows, the daily RSI readings are bullish and suggest that a trend reversal will occur soon.
If one does, the main resistance area for the future price would be at $7.70. This is the 0.5 Fib retracement resistance level and a horizontal resistance area.
However, the bullish daily RSI readings are not sufficient to neutralize the bearish DOT price prediction from the weekly time frame and the bearish price action from the daily time frame.
When Will DOT Reverse?
To conclude, there are some signs in the daily time frame that support the beginning of an upward movement towards $7.70.
However, due to the bearish long-term readings, a weekly close above $6.60 would be unlikely despite the potential for a wick high above it.
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