Polkadot’s potential rebound – Will DOT chart a path to $11?

• DOT breaks out of a falling wedge pattern and shows a bullish hammer candlestick, indicating a possible price rally.
• Open interest rises, while RSI remains neutral, supporting potential upward movement without immediate risk of pullback.

Polkadot [DOT] is currently experiencing a steady price rebound, registering consecutive weeks of gains.

Over the past two weeks, DOT has risen by 14.2%, and within the past week alone, it has seen an 11% increase. At the time of writing, the token trades at $4.90, reflecting a 2.3% rise over the last 24 hours. 

This consistent upward movement in price is supported by various technical indicators suggesting that DOT could be on the verge of a more significant rally.

The $11 rally potential

Technical analysis revealed that the current price surge in DOT is linked to a breakout from a falling wedge pattern, a bullish indicator commonly seen in financial markets.

A falling wedge pattern forms when price action shows a narrowing downtrend, which is typically followed by a breakout upward, indicating a potential reversal in trend. 

Source: DOT/USDT on TradingView

Now that DOT has broken out of this wedge, further upward momentum is anticipated.

Although the token remains below the $5 mark, the technical implications of the breakout point towards the potential of DOT climbing to prices above $11 to validate this pattern fully.

Adding further weight to DOT’s bullish outlook is the appearance of a hammer candlestick pattern on its daily chart.

In technical analysis, a hammer pattern is a reversal indicator characterized by a small body and a long lower shadow, signifying that buyers pushed the price back up after a period of downward pressure. 

Source: DOT/USDT on TradingView

This is generally interpreted as a positive sign for potential price increases.

The formation of this pattern on the heels of DOT’s breakout from the falling wedge provides additional confirmation of bullish sentiment, reinforcing the likelihood of a significant rally in the near term.

Fundamental outlook on DOT

While these technical signals are encouraging, the question remains whether DOT’s underlying fundamentals support this bullish momentum. To gauge this, it is worth examining several key metrics. 

Data from Coinglass indicates that DOT’s Open Interest — a measure of the total number of outstanding derivative contracts — has risen by 3.20% to reach $233.03 million.

This uptick in Open Interest typically suggests increased market activity and interest from traders. 

Source: Coinglass

However, contrasting this, DOT’s Open Interest volume has seen a decline of 15.16%, now standing at $190.48 million.

A rise in Open Interest combined with a drop in volume may imply that while more derivative positions are being established, the intensity of trading is cooling down, potentially reflecting cautious investor sentiment.

Another critical factor to consider is the Relative Strength Index (RSI), a momentum oscillator that measures the speed and change of price movements.

Data from CryptoQuant revealed that DOT’s RSI was a figure of 68 at press time. This value, being below the overbought threshold of 70, suggested that the asset is currently in neutral territory. 

Source: CryptoQuant

Read Polkadot’s [DOT] Price Prediction 2024–2025

Typically, an RSI below 70 indicated that the price has room for further upward movement without entering an overbought condition that could trigger a pullback.

Hence, the neutral RSI supported the potential for additional price gains, aligning with the technical patterns observed on DOT’s chart.