DOT climbs above $7 as buyers eye this target below (Polkadot Price Analysis)

Polkadot has been mired in a prolonged consolidation phase, around the 200-day moving average and the $6.3 mark, reflecting uncertainty about its future trajectory.

However, a break below this crucial support area could culminate in a decline towards the $5.1 threshold.

Technical Analysis

By Shayan

The daily chart

A closer examination of the daily chart reveals a period of uncertainty and sideways consolidation near the critical support level of $6.3 and the 200-day moving average.

Interestingly, the price has formed an ascending wedge pattern, a famous bearish continuation pattern, which hints at the seller’s potential dominance of the market.

Should the sellers successfully break the lower boundary of the wedge, a significant downtrend towards the crucial $5.1 support level is highly likely. Conversely, a sudden bullish move would prompt buyers to target the 100-day vital moving average, currently around $8.1, in the medium term.

Source: TradingView The 4-hour chart

Examining the 4-hour period, it is clear that Polkadot’s recent downtrend found support near the pivotal $6 region, triggering a notable bullish reversal.

However, after a period of upward movements, the price has once again found the critical resistance zone defined by the Fibonacci levels of 0.5 ($7.4) and 0.618 ($7.8).

This region is accompanied by substantial selling pressure, which may lead to another bearish rejection. However, Polkadot’s price remains confined within a critical range, bounded by the support region at $6 and the crucial resistance at $7.4.

Price action within this range serves as the primary benchmark for predicting the future direction of the cryptocurrency. However, a sudden rise above the Fibonacci levels of 0.5 ($7.4) and 0.618 ($7.8) could herald a medium-term bullish resurgence.

Source: TradingView Sentiment Analysis

By Shayan

Given the recent notable decline and subsequent arrival at a substantial support area, traders may be willing to assess futures market sentiment. The attached chart shows the Aggregate Open Interest and Aggregate Liquidation metrics along with Polkadot price on a daily basis.

Importantly, the recent significant decline was largely driven by aggressive short positions. As shown in the chart, this decline resulted in the liquidation of a significant number of long positions, culminating in a massive long event. Consequently, the Open Interest metric also experienced a notable decline, indicating a cooling phase in the perpetual markets.

Therefore, the futures market looks set for execution of both long and short positions, which could lead to significant price movement in the medium term.

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