Polkadot (DOT) at Crossroads: Bullish Reversal Possible After 15% Dip

Key Takeaways

• Polkadot dropped below $4 recently, but a falling wedge pattern suggests a possible bullish reversal.
• If DOT replicates its historical breakout pattern and RSI rebounds, it could break resistance at $5.53
• Indicators reveal weak momentum, as failure to break the descending channel could lead to a decline.
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Polkadot’s (DOT) dropped below $4, aligning with CCN’s recent price analysis. The decline happened after DOT’s value experienced a 15% correction within the past week.

Despite the decline, the altcoin seemed to have formed a bullish pattern that usually precedes a notable rally.

However, other indicators have yet to validate the move. With this in place, here is how DOT might perform if it validates the pattern or not.

DOT Price Action Differs This Time

On the weekly chart, Polkadot’s price decline below $4 has led to the formation of a falling wedge. For context, a falling wedge is a bearish to bullish pattern that occurs after two downward trendlines almost converge at a point.

Historically, when this happens, DOT breaks out. For instance, as seen below, a falling wedge appeared between March and October 2024, with the price falling to $3.42.

Later, Polkadot’s price broke above the upper trendline and surged past $10 in December. If history repeats itself, DOT could be poised for another major breakout.

However, a key difference exists between the current price action and the previous surge. The Relative Strength Index (RSI) reading then climbed and supported the upswing.

As of this writing, the RSI, which measures momentum, is down to 39.91. This rating indicates bearish momentum. If this trend continues, DOT’s price might struggle to replicate the 170% hike it registered last December.

DOT Short-Term Outlook: Breakout or Breakdown

Furthermore, the daily outlook is also similar. As shown in the chart below, Polkadot’s price trades within a descending channel.

However, the current price tests the upper trendline of the descending channel, indicating that the token is attempting to exit the bearish pattern.

Still, other indicators such as the Moving Average Convergence Divergence (MACD) might limit this move. The MACD, like the RSI, measures momentum.

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When the reading is positive, momentum is bullish. However, the MACD reading has declined to negative territory in this instance.

Failure to rebound to the positive region might keep DOT’s price trapped in the descending channel. If that is the case, DOT’s price might fail to validate a breakout above the falling wedge.

• Bearish scenario: Should DOT fail to break past the upper trendline of the descending channel, the price might experience consolidation. However, if the MACD reading continues to drop, Polkadot’s price might experience an accelerated correction, which could drag it down to $3.

• Bullish scenario: To validate the breakout, the RSI reading might have to follow the trend experienced in December. If that happens, DOT might breach the $5.53 resistance at the 0.236 Fibonacci level.

Once this happens, the altcoin’s next target might be a rally to $6.74. In a highly bullish market condition, its value could soar to $8.69.