An inauspicious start to the weekend saw most large-mid cap alts extend their losses after Bitcoin traded below $36K for the first time in nearly 6-months. Polkadot, which was already vulnerable to a head and shoulders breakdown, suffered a 22% decline compared to yesterday’s close.
Polkadot 4-hour time frame
A head and shoulders breakdown saw Polkadot shift beneath a region of demand between $24-$22 for the first time since August 2021. The target set by the ‘head’ and ‘neckline’ was rounded off to 53%, which meant that sellers would likely maintain their relentless assault until DOT discovers a safe zone. Although, it’s worth noting that DOT could be in a brief period of returns should BTC rally back to $40K temporarily. DOT’s price currently sat within a tight demand pocket between $17-$15, ideal for a dead cat bounce.
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However, keep in mind that DOT’s upside would most likely be limited between $24-$22, which now served as a supply region. Once the market returns to normality, DOT would remain exposed to a decline all the way to its May levels around $10.4-$13.
Indicators
The On Balance Volume, which measures buy volumes against sell volumes was in danger of breaking its streak of higher lows. A closer look at the OBV showed that market participants have steadily offloaded their tokens soon after DOT touched an ATH in November 2021. A new lower low would mean that investors would have fully discounted DOT’s earlier bull run, shifting crowd sentiment heavily in favor of sellers.
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Interestingly, the daily RSI did back a short run-up after touching the oversold territory. In any case, sellers would mostly reject any advancements above 50 and maintain an overall grip on proceedings.
Conclusion
Polkadot could find some relief above $15 before heading south to $13-$10.4 over the coming weeks. Those expecting a mini-rally should keep their take-profits between $22-$24 and maintain a tight stop-loss at $14.5.