Risks of high volatility in the coming week? But the DOT could defy the trend
Since hitting an all-time high on November 4, the Polkadot Bears (DOT) have been in control as the DOT declined between parallel lines heading south (yellow). The most recent drop pushed the alt below its six-month trendline support (now resistance).
A sustained close below its control point (red) near the $17.2 mark would increase further downside risks. This drop would likely see a clash between buyers and sellers in the $17-$14 range ahead of a trend commit move. At press time, DOT was trading at $17, down 4.5% in the past 24 hours.
DOT Daily Chart
The latest bearish phase (of its ATH) led to the alt losing over 71% of its value and plunging to its 25-week low on January 24th. As the checkpoint served as a strong buy zone, the DOT reversed to form a bearish flag on its daily chart.
While the bearish flag dipped below the six-month support (now resistance), the current price was still not breached from its 20-50 EMA. Thus, increasing the chances of high volatility in the coming days. Additionally, the alt reversed after the first retest of its trendline resistance, confirming the downtrend.
Thus, a sustained close below the $17 area would be a crucial confluence to reaffirm the DOT downtrend. In this case, the alt was looking at a likely retest of the $14 mark in the coming days. Close monitoring of the February 20th candlestick would be vital in determining the possibility of a bullish rally.
The RSI has struggled to find a close above the middle line since mid-November, confirming the bearish edge. Now he was looking south towards the 32-point mark after dropping all 37 points.
To top it off, the Squeeze Momentum indicator showed a gray dot on February 20. This reading led to a phase of high volatility. Additionally, with the -DI looking north, the DOT has consistently refrained from revealing strong signs of recovery.
The DOT lost its vital 61.8% Fibonacci support which coincided with its six-month trendline resistance. Thus, affirming the strength of the current downtrend. Retracements below the control point would find a floor near the $14 mark before a move entering the trend.
Even then, an overall market sentiment analysis becomes essential to complement the technical factors to make a profitable decision.