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Will Polkadot [DOT] be subjected to sharp sell-off coming week

2min Read
Polkadot drops below the $7 support in the bloody aftermath of a sharp sell off

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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.

Bitcoin [BTC] fell by nearly 7% in recent hours of trading and had a bearish short-term outlook yet again. Many altcoins also followed and posted double-digit percentage losses over the previous day of trading alone.

Polkadot [DOT] was one of these coins. The coin was able to climb to the $7.7 mark on the back of steady demand. However, the buyers quickly turned into sellers as fear gripped the market yet again.

DOT- 1-Hour Chart

Polkadot drops below the $7 support in the bloody aftermath of a sharp sell off

Source: DOT/USDT on TradingView

Polkadot has traded within the $7.7 and $6.9 area for most of the past two weeks. The Volumpe Profile Visible Range tool showed the Point of Control to lie at $7.25. This was the point at which the most trading volume was witnessed over the visible range. It marked a significant level of support, one that DOT smashed past the previous day.

The Value Area Low (VAL) and High lay at $7.03 and $7.64. At the time of writing, the price was beneath the VAL. The VAL represented a decent buying opportunity, but the dip beneath $7 meant that long positions might be unsafe.

A revisit to the $7 and $7.3 could occur as the price searches for liquidity. However, the $7.25-$7.3 belt would likely pose far too much resistance for DOT to be able to break past on its first couple of tries.

Rationale

Polkadot drops below the $7 support in the bloody aftermath of a sharp sell off

Source: DOT/USDT on TradingView

The Relative Strength Index (RSI) dropped from 60 to 22 over the course of the previous day’s trading. The Moving Average Convergence Divergence (MACD) also saw a sharp plunge beneath the zero line.

It was pretty straightforward that bearish momentum was dominant in recent hours. But can a relief rally be expected for DOT?

The Accumulation/Distribution (A/D) indicator saw a drop as well and was below a resistance level from last week. A rejection at this level could be a precursor to further losses. The Chaikin Money Flow (CMF) also hinted at a bearish bias. It was firmly below the -0.05 mark to indicate significant selling pressure.

Conclusion

The price would need to flip $7.3 to support before a bullish short-term bias can be justified. The volume indicators would also need to climb past their respective resistance levels. It appeared more likely that a move to $7.25-$7.3 would offer a selling opportunity than a buying one.

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Akashnath Sumukar works as a Senior Journalist at AMBCrypto. Based in Chennai, India, he has been an avid follower of the cryptocurrency market since Bitcoin’s boom and bust cycle of 2017. A graduate in Chemical Engineering, he is an expert in technical analysis. In fact, Akashnath has a particular interest in reading price charts and predicting how an asset will move over the short and long term. A self-taught trader and as someone who holds cryptos himself, he is always on the lookout for the next opportunity he can possibly capitalize on, while also educating his audience.
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