Polkadot (DOT), a popular cryptocurrency in the blockchain space, has made waves with its innovative approach to interoperability and scalability. However, as with any financial asset, its price movement is subject to various technical analysis patterns, one of which is the rising wedge chart pattern.
The formation of a rising wedge pattern on DOT’s price chart suggests that, despite the recent upward trajectory, there could be a decline on the horizon. Traders and investors often look for confirmation signals, such as a break below the bottom of the wedge, to confirm the validity of the pattern and anticipate possible selling pressure.
Currently, DOT’s price is down -0.13% and is trading at around $7.13, with a market cap of over $10 billion and a trading volume of over $153 million at the time of writing. Although the market capitalization has fallen by 0.39%, trading volume has increased by 0.34% over the past day.
Using the 100-day Simple Moving Average (SMA) and the Relative Strength Index (RSI), this analysis was performed using both the 4-hour and daily time frames.
Analytical view of the current price condition of DOT
Currently on the 4-hour chart, the DOT is still moving in a consolidating manner, with the upper base and lower base of the wedge building momentum below the 100-day simple moving average.
The 4-hour relative strength index indicates that the price of DOT could break below the lower base of the wedge as the RSI line moves slightly below the 50% level. From this RSI formation it can be suggested that if DOT breaks below the wedge, it will start moving down towards the nearest major support level.
Meanwhile, on the 1-day chart, the DOT price is trending within the wedge, but close to the lower base. The 1-day RSI also suggests that DOT could turn bearish as the RSI line tries to break below the 50% level. Based on this RSI formation, investors are advised to watch for a break below the wedge before taking sell positions.
Potential price action in the event of a breakout
Currently, the price of the crypto asset is still moving within the wedge, and DOT will start falling towards the $4.8 support level in case a breakout occurs below the wedge. If the price falls below the above-mentioned level, it might fall further to test the USD 3.5 support level.
On the other hand, if the price reverses course and breaks above the upper base of the wedge, it will start rising towards the $9.8 resistance level. Should the price break above this level, Polkadot will move higher to test the $11.9 resistance level. Additionally, DOT could see a steeper increase in testing more significant levels if it closes above $11.9.
Featured image from Adobe Stock, chart from Tradingview.com