Disclaimer: The findings in the following analysis are the sole opinions of the author and should not be taken as investment advice.
The latest Bitcoin sell-off from the $ 48k mark had a ripple effect on the altcoin market. The top 10 highs declined between 2.17% and 6.66% amid panic selling. For Polkadot, the losses were at the extreme end of the range mentioned above. A correction phase was already active in the market at that time, something that may have accentuated the DOT’s decline on the charts.
On the upside, the DOT’s lower trend line had yet to be altered at press time. This meant that the DOT was well within an uptrend. If the price finds support anywhere above its 38.2% Fibonacci level, a quick recovery can be expected.
At the time of this writing, the DOT was trading at $ 29.1, down 6.6% in the past 24 hours.
Polkadot 4-hour chart
Since the end of July, Polkadot has formed constant highs and lows. This was reflected in a lower ascending trend line that extended from the $ 10.5 mark. Even after the decline on September 7, the DOT was able to maintain its bullish trajectory after recovering from its Fibonacci level of 38.2%. In fact, this marked another higher low.
Now if this cycle holds and the DOT can find a higher level of support, an uptrend would still be active in the market. That would also identify the next leg up the DOT. A closer look at the DOT 4-hour chart suggested that buyers are already responding to this outlook.
A couple of green candles appeared after the DOT touched the $ 28.6 support. From here, a close above the 50% Fibonacci level and $ 31.1 would keep the DOT trend intact and push the alt to a cooler local high above $ 38.8.
On the other hand, a close below the 38.2% Fibonacci level would mark a lower low and threaten to nullify the DOT’s bullish predictions. Losses can extend as high as $ 22.8 if short sellers jump on board as well.
Based on the RSI reading, a price reversal seemed to be in order. The movement of the RSI into oversold territory generally triggers buying behavior as investors rush to take the asset at a discounted level.
There was also a slight recovery in the MACD after it fell to a low of almost 3 months. However, the trajectory of the Directional Movement Index suggested that sellers remained dominant. The -DI line gained some distance on the + DI line and a rising ADX meant that DOT remained vulnerable to further losses.
Based on the aforementioned factors, it is too early to call for a bullish comeback even though a couple of weak green candles formed on the DOT chart.
To confirm a favorable outlook, the DOT needs to close above $ 31 and its Fibonacci level of 61.8%. Otherwise, the market would risk a lower low and a possible change in trends.
This is a machine translation of our English version.