Analysis
Polkadot traders can look to invest in DOT upon a test of this demand zone
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Journalist
Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion.
- The market structure of DOT in the near term was bearish
- A drop to the $3.85 level was a possibility that traders should be prepared for
A recent Polkadot [DOT] price report noted that the price was trading within a short-term range that extended from $3.9 to $4.2. The area just above $4.2 was a resistance zone from the daily timeframe that bulls could have a hard time breaching.
Read Polkadot’s [DOT] Price Prediction 2023-24
The financial statements of Polkadot from the last seven days noted an increase of 16.2% in the number of holders within the Polkadot ecosystem. Conversely, there was a massive drop in daily active users and a slight reduction in core developments over the past month. Should this worry the bulls?
The short-term market structure flips bearishly once more
Source: DOT/USDT on TradingView
On 15 September, the market structure on the two-hour chart of Polkadot shifted bullishly when the recent lower high at $4.1 was breached. Following this development, the buyers drove prices as high as the $4.224 resistance before facing rejection.
The past five days saw large volatility in the DOT prices, with $4.05 and $4.2 serving as support and resistance levels respectively. To the dismay of the bulls, the recent slump in Bitcoin [BTC] prices brought DOT back toward the $4 mark.
There was a bullish order block (cyan box) that extended from $3.91-$4.02 where a bullish reversal could occur. In particular, the $3.95 support was one to watch as it brought the bullish structural break last week. Hence buyers can seek to enter a long trade at that level, with a stop-loss below the $3.89 mark.
The order books show a chance of a southward liquidity hunt
Source: MobChart
MobChart data showed there were limited buy orders worth $910k from $4 to $3.899. By itself, it does not mean DOT will see a bounce in prices due to the high volume of buy orders. Sell pressure could overwhelm these orders. This was what had occurred on 11 September, when the price dipped to $3.92 before climbing higher to test $4.2.
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This information suggested that DOT could sweep these lows in search of liquidity, possibly form a deviation to the south reaching around $3.85 before a short-term bullish revival. This respite bounce is what traders can look to ride higher and book profits on, but BTC and DOT volatility could make this venture risky in the coming days.
