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Disclaimer: The findings of the following analysis are the sole opinions of the writer and should not be taken as investment advice
Polkadot has seen a lot of bearish pressure in the market over the past few days, as have the rest of the market’s altcoins. Contrary to the latter, however, DOT was yet to register a trend reversal despite consistent depreciation in value.
At the time of writing, DOT was trading at $31.5 with a market capitalization of over $29 billion. In the past 7 days, the coin saw its trading price fall by over 25 percent and in the next 24 hours, if the bearish pressure sustains itself, DOT may flip a key support level into resistance.
Polkadot 1-day chart
Source: DOT/USD, TradingView
DOT’s steady decline over the past few days has now brought it to the crucial $30.7-support level. If the bearish market were to prevail in the coming 24 hours, DOT may end up breaching this level. The next level of support for the coin was all the way down at $19 and a move to such a price point over the week cannot be discounted.
In such a scenario, traders can benefit from opening short positions with an entry point below the coin’s immediate support. However, if a trend reversal takes place in the coming few days, then the coin will soon have to confront strong resistance around the $40.4-price level in a bid to secure a 100 percent recovery.
Rationale
For Polkadot, the technical indicators don’t look very promising, at the time of writing. The MACD indicator underwent a bearish crossover with the Signal line going past the MACD line and signaled that the downtrend was likely to continue in the coming days. The RSI indicator had also fallen well into the oversold zone and painted a bearish picture for the coming week.
Important levels to watch out for
Entry: $29.4
Stop loss: $40.7
Take profit: $19.4
Risk/Reward ratio: 0.89
Conclusion
DOT may see a prolonged bearish market before it is able to recover its losses. In the coming day’s time, if the coin flips the key support at $30.7 to resistance, it may end up seeing a further price drop all the way down to the $19-$20 range before a recovery materializes. In such a scenario, traders can benefit from short positions and take profit around the second support level.
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