Polkadot (DOT) has bounced at an important support area and is showing bullish reversal signs. However, it has to break out from its short-term descending resistance line in order to confirm the reversal.
DOT has been falling since Nov 4, when it reached an all-time high price of $55.19. The ensuing drop suggests that the alleged breakout was only a deviation (red circle), since DOT fell below the $48 horizontal area shortly afterwards.
Since Dec 4, the token has been trading inside the $27 area. This is a crucial support area, since it is both the 0.618 Fib retracement support level and a horizontal support area. Therefore, in order for the upward movement to continue, it is crucial that DOT holds above this level.
Technical indicators in the daily time-frame are starting to show bullish signs.
The MACD, which is created by a short- and a long-term moving average (MA), has generated bullish divergence. Furthermore, it created several successive higher momentum bars. While the fact that it is still negative is a bearish sign, it is showing potential signs of a bullish reversal.
Similarly, the RSI has crossed above 30 and has also generated bullish divergence (green line). The RSI is a momentum indicator, in which readings below 50 are considered bearish. The indicator is still below this line. However, the fact that it crossed above 30 and the bullish divergence are signs of a potential bullish reversal.
Cryptocurrency trader @CryptoCapo_ tweeted a DOT chart, stating that the trend is bullish as long as the token is trading above the $27 support area. This aligns with the readings from the daily time-frame.
Short-term DOT movement
The shorter-term six-hour chart shows that DOT has been following a descending resistance line since the aforementioned all-time high. This indicates that the token is correcting in the short-term.
Similarly to the daily time-frame, both the 6-hour RSI and MACD have generated bullish divergences.
If a breakout from the resistance line transpires, the closest resistance would be between $36.40-$40. This is created by the 0.382-0.5 Fib retracement resistance levels and a horizontal resistance area.
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