Polkadot (DOT) Falling Wedge Breakout Hints at 65% Upside

Key Takeaways

• After a 60% drop in two months, DOT’s price is on the verge of validating a bullish pattern.
• The RSI has risen above the downtrend and is in place to drive DOT’s upward momentum.
• The daily chart shows a bullish crossover, indicating it might resist another downturn.

Polkadot (DOT) price briefly dipped below $5 on Feb. 6 but quickly rebounded after finding support. The recent bounce suggests a potential extended rally if a historically bullish pattern holds.

However, with the broader market still subdued, will buyers sustain the breakout, or is this a false breakout? This technical analysis reveals what could be next for DOT’s price.

DOT Confirms Bullish Divergence

Between Dec. 7, 2024, and Feb. 7 this year, DOT’s price dropped by nearly 60%. During this period, the altcoin moved from a swing high of $10.70 to a swing low of $4.50.

Following the decline, the daily chart shows that DOT formed a falling wedge. A falling wedge is a bullish reversal pattern formed by two descending trend lines.

In this pattern, the upper trendline represents the lower highs, while the lower one represents the lower lows. Typically, when an asset’s price breaks above the upper trendline of a falling wedge, it signals a potential extended rally.

For DOT, the price at $5.17, appears to be flirting with the upper trendline, indicating that the cryptocurrency will likely surge above the resistance. The Relative Strength Index (RSI), on the same timeframe also seems to support the potential.

As seen above, the RSI followed the same trend as the falling wedge, indicating weak momentum.

However, as DOT’s price bounced, the indicator broke above the falling channel. If sustained, this could validate DOT’s extended rally.

DOT Price to New Peak?

Looking at the daily chart again, the negative Moving Average Convergence Divergence (MACD) reading has flipped to the positive region.

This change in position indicates that the momentum around DOT’s price has become bullish. Furthermore, the 12-day Exponential Moving Average (EMA)— in blue has crossed above the 26 EMA (orange).

Usually, the trend is bearish when the longer EMA crosses over the shorter one. But since it is the other way around, the trend around the Polkadot native token seems to moving toward the bullish side.

If this trend continues, DOT’s price could rally by 65% and hit the 0.382 Fibonacci level at $8.60. However, to validate this potential, Polkadot’s price must break the resistance at the 0.786 and 0.618 Fib levels.

For this to happen, the RSI reading needs to rise above the 50.00 midpoint. Also, DOT bulls must push the price higher than $5.37 and $6.71.

Once achieved, the $8.60 target might come to pass. On the contrary, if the token fails in its bid to surpass $6.71, this double-digit hike might not become a reality.

Instead, the forecast might be rendered null and void, and the price could decline to $3.66.