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Analyzing Polkadot’s head and shoulders – Is a drop to $3.47 likely?
As of the time of writing, Polkadot (DOT) is trading at $7.20 after registering gains of 2% in 24 hours, with its trading volume declining by 9% to $290M on the charts. Despite this short-term surge, bearish signs are emerging on the altcoin’s one-day chart, hinting at a potential correction.
Firstly, Polkadot has formed a bearish head and shoulders pattern, typically preceding a sharp downturn. The recent rejections at the neckline resistance level of $7.56 suggest that buyers have been inactive, paving the way for sellers to take control. This could lead to a significant drop of over 50% towards $3.47.
Furthermore, an analysis of the Chaikin Money Flow (CMF) reveals that selling pressure outweighed buying pressure, underlining a bearish momentum likely to push DOT prices lower.
Additionally, Bollinger Band Trend indicator’s fading histogram bars hint at a weakening bullish momentum, increasing the likelihood of a downtrend unfolding if buyers fail to re-enter the market. This could result in Polkadot plummeting towards the next resistance level at $9.20, and potentially even further, should buying pressure be absent.
In addition to these technical indicators, a closer examination of network metrics highlights an alarming decline in Polkadot’s daily active users and revenue, reaching a 30-day low of 4,200 users. Concurrently, daily revenues plummeted to $1,118, signifying fewer people utilizing the platform. If this stagnation persists, it could amplify bearish sentiments, ultimately driving DOT prices downwards.
Finally, Polkadot’s liquidation heatmap reveals that there are no immediate liquidation levels in close proximity to the current market price of $7.20. However, a hot liquidation zone exists at $6.80, indicating that if the price falls to this level, it may trigger a wave of long liquidations, exacerbating the downturn.
In conclusion, while DOT has experienced a brief resurgence, its technical and fundamental indicators are pointing towards a potential correction, with a drop to $3.47 appearing increasingly likely.
Source: ambcrypto.com
