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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
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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 S is a Senior Journalist and Technical Analysis expert at AMBCrypto. He specializes in dissecting price action, identifying key market trends through advanced chart patterns, and forecasting both short-term and long-term asset trajectories. His distinct analytical method is grounded in his academic training as a Chemical Engineer. This background provides him with a systematic, process-oriented approach to market data, enabling him to analyze the complex dynamics of financial markets with precision and objectivity. Having actively covered the cryptocurrency space since the landmark 2017 market cycle, Akashnath possesses years of experience navigating both bull and bear markets. This seasoned perspective is critical to his insightful reporting on market volatility and evolution. As an active market participant, Akashnath enhances his analysis with crucial, hands-on experience. This practical application of his technical skills ensures his insights are not merely theoretical, but are also relevant and actionable for an audience looking to understand and navigate trading opportunities. He is dedicated to educating readers on the nuances of technical analysis, empowering them with the knowledge to make more informed financial decisions.
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