Polkadot was trading at a critical price level- one which could make or break its price. Ideally, a double bottom at $23.2 was expected to trigger a run-up to $30 but the same was offset by weak readings on the RSI and MACD. If a double bottom fails at $23.2, DOT would be vulnerable to another massive sell-off. At the time of writing, DOT traded at $22.6, down by 6.7% over the last 24 hours.
Polkadot 4-hour time frame
Polkadot’s rally between 20-28 December seemed like a missed opportunity after its price failed to cement above the 23.6% Fibonacci level. As a result, DOT has not had the best start to 2022. A 22% correction was observed last week as the RSI and MACD continued to flag red signals.
While bulls may have looked forward to a double bottom pattern at $23.3, a bearish crossover between the daily 50 (yellow) and 200 (green) SMA’s would weigh on DOT’s price. Should DOT maintain its streak of lower highs, the next point of contact would be made around $20. A deeper support level present at $14 would be called into action in case of a prolonged sell-off. These levels indicated a sell-off anywhere between 15%-40%.
Meanwhile, DOT’s path to recovery contained several obstacles. Bulls had to force a close above the daily 200-SMA (green) to retake the 23.6% Fibonacci level. DOT’s downtrend would finally end once the price advances above the 50% Fibonacci level, breaking the streak of lower highs.
Indicators
DOT’s daily MACD encouraged sellers to bet against the market after registering a bearish crossover on 7 January. Bulls have been absent since then as the histogram has continued to decline.
The daily RSI’s situation was no better than the MACD. The RSI has mostly traded below its half-line since November 2021, with bears rejecting the only bullish attempt made during late December.
Conclusion
Sell signals on the MACD and RSI meant that shorting Polkadot was the way to go until a major support line is tested. A daily close below $23.2 would generate more selling pressure this week. Long calls should be made once Polkadot manages to find a footing above the 23.6% Fibonacci level.