DOT traders should consider reading this before making a move

DOT traders should consider reading this before making a move

Disclaimer: The information presented does not constitute financial, investment, trading or other types of advice and is solely the opinion of the author

  • Polkadot (DOT) has found new support at $5.0
  • Negative sentiment can undermine effective price growth

After passing several supporters, Polkadot (DOT) finally found a calm zone at $5.0. At press time, DOT was trading at $5.38, up 5% in the past 24 hours. The rally corresponded with BTC’s recovery of the $16k level.

Read Polkadots [DOT] Price prediction 2023-24

Despite the price increase at press time, however, the market structure was still weak. Therefore, the DOT may continue to fall to its new support of $4.4.

New support at $5; will it last?

Source: DOT/USDT, TradingView

DOT recorded an impressive rally between October and November, ending with an ATH of $7.42. However, bearish sentiment following the FTX implosion sent the asset crashing.

It found a support zone at $5.4, from which the bulls attempted two price recoveries. However, the two recovery attempts ended in a bearish order block around the 23.6% Fib level ($5.58). A price correction after the second recovery attempt fell below the previous support, turning the DOT into a bearish market structure.

At press time, DOT was on the verge of a rally to break the $5.3 level. However, the current bearish market structure could push the price towards $5 or as low as $4.44 in the coming days or weeks. The Relative Strength Index (RSI) was at 38, which shows that sellers have influence.

Volume on balance sheet has also reached a number of lows since mid-September. Ergo, both show that the market is still weak, and favor sellers.

However, the bearish bias will be invalidated if DOT breaks the 23.6% Fib retracement level ($5.58) on the intraday close. In this case, the new resistance target of the DOT will be the bearish order block zone around the 38.2% Fib retracement level.

Negative sentiment and falling development activity

Source: Sentiment

In accordance Sentiment, DOT’s development activity bottomed out on November 7th before picking up again until mid-November. It fell steadily thereafter, with a steep downward trend at the time of writing. Interestingly, the price action followed the development activity to a significant extent.

Also, overall weighted sentiment was in negative territory at press time. Given the decline in trading volume when DOT’s price rises, the price-volume differential could undermine strong buying pressure. This could point to a possible price decline or a deeper plunge.

If BTC holds $16,000 or breaks through $17,000, DOT could continue its ongoing rally. However, the price-volume differential and negative sentiment could undermine any significant buying pressure that could turn the current market structure into an uptrend.

Long-term investors of DOT should therefore be cautious and monitor BTC, market sentiment and the development activity of the asset.

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