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Analysis

Polkadot: Estimating the probability of a pullback with tips for traders

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Polkadot likely to see a short-term pullback on the back of this bearish pattern
Source: Pixabay


Disclaimer: The findings of the following analysis are the sole opinions of the writer and should not be considered investment advice

Polkadot formed a rising wedge pattern, which generally sees the price drop toward the base of the pattern. This was on lower timeframe price charts, which meant that a pullback could be a decent buying opportunity. On the other hand, this bearish pattern could be invalidated with a strong push upwards by the price.

DOT- 1 Hour Chart

Polkadot likely to see a short-term pullback on the back of this bearish pattern

Source: DOT/USDT on TradingView

The $19.41 resistance level loomed large on lower timeframes for DOT. Moreover, the price formed a rising wedge pattern (white). This is a bearish reversal pattern that can see the price pullback while on an uptrend.

Based on the move from $17.11 to $19.54, a set of Fibonacci retracement levels (pale yellow) was plotted. At the same time, the $17.5-$18 area has acted as a zone of both supply and demand for DOT in the past week. This demarcated the cyan box as an area where bulls could take a stand.

On the other hand, the rising wedge pattern can be invalidated if DOT manages to flip the $19.41 resistance to support, and breaks out to the north of the pattern.

Rationale

Polkadot likely to see a short-term pullback on the back of this bearish pattern

Source: DOT/USDT on TradingView

The RSI on the hourly chart dropped toward neutral 50 even as the price attempted to push past the $19.41 level. This suggested waning bullish momentum even as the bulls tried to drive prices further higher. It was a similar story on the Awesome Oscillator.

Even though the AO remained above the zero line, it showed waning bullish momentum.

The OBV did not see a large drop yet and has been on an uptrend during the price’s formation of the wedge pattern.

Conclusion

The $18 area can be a place where DOT would drop to in the next day or two, and the $17-$18 area could be used to enter long positions on a pullback. The wedge pattern can also be invalidated on a session close above the pattern.

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Akashnath is a Chemical Engineering graduate deeply fascinated by Technical Analysis and the crypto markets and enjoys studying price movements and trying to find patterns.

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Disclaimer: AMBCrypto's content is meant to be informational in nature and should not be interpreted as investment advice. Trading, buying or selling cryptocurrencies should be considered a high-risk investment and every reader is advised to do their own research before making any decisions.