Polkadot [DOT]: Key support level vital for reversing bearish momentum
Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion.
- Bears sink DOT to March swing lows.
- Funding rates stayed positive to offer bulls hope for a reversal.
Polkadot’s [DOT] month-long decline has seen the coin lose 25.8% of its value. The crypto market’s recent correction accelerated DOT’s losses with a 9% drop over the past seven days.
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With Bitcoin’s [BTC] pullback to the $26k range, sellers maximized the opportunity to push Polkadot to its March swing low of $5.2.
This price area has twice initiated a price rally in January and March. Can bulls defend the support and push forward once again?
Is another price rally from the $5.2 support level possible?
Earlier in mid-February, DOT experienced a significant downward trend that was halted by the bullish order block at the $5.2 support level. A recurrence of the same price movement in mid-April has taken DOT back to the critical support level.
A look at the price on the 12-hour timeframe saw DOT post two successive bearish candles with the second candle closing slightly above the support level. This suggested long-term sentiment still favored the bearish movement.
However, a drop-down to the four-hour timeframe showed buyers’ attempts at a price rally with two successive bullish candles.
Technical indicators remained in alignment with the downward trend. The RSI indicator stayed under neutral 50 with a reading of 33.2, as of press time. The OBV also reflected DOT’s declining daily trading volume.
A mid-term recovery plan for bulls will involve a four-hour candle close above the $5.2 support level, followed by a 12-hour close above the same level. This could lead to a rally to the $6.1 price range.
On the flip side, a bearish candle close on either timeframe below the support level and bullish order block will signal more selling opportunities. Shorts can then target the December low of $4.2.
How much are 1,10,100 DOTs worth today?
Shorts retained dominance in the futures market
The liquidation data for DOT over a three-month period showed that the markets were not yet priced in for a bullish reversal.
Longs have taken the most hits with large spikes in liquidated positions. Furthermore, data from Coinglass showed that $2.29 million worth of long positions were liquidated over the past five days. This represented 92% of total liquidations.
However, the funding rates stayed positive to signal a glimmer of hope for bulls. DOT’s correlation with BTC could determine its next move. A rally for the king coin will offer bulls a unique reversal opportunity again from the $5.2 support level.