Polkadot [DOT]: Key support level vital for reversing bearish momentum

12 May 2023

in DOT

Reading Time: 5 mins read

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

Bears sink DOT to March swing lows.
Funding rates stayed positive to offer bulls hope for a reversal.

Polkadot’s [DOT] month-long decline has seen the coin lose 25.8% of its value. The crypto market’s recent correction accelerated DOT’s losses with a 9% drop over the past seven days.

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With Bitcoin’s [BTC] pullback to the $26k range, sellers maximized the opportunity to push Polkadot to its March swing low of $5.2. T

his price area has twice initiated a price rally in January and March. Can bulls defend the support and push forward once again?

Is another price rally from the $5.2 support level possible?

Source: DOT/USDT on Trading View

Earlier in mid-February, DOT experienced a significant downward trend that was halted by the bullish order block at the $5.2 support level. A recurrence of the same price movement in mid-April has taken DOT back to the critical support level.

A look at the price on the 12-hour timeframe saw DOT post two successive bearish candles with the second candle closing slightly above the support level. This suggested long-term sentiment still favored the bearish movement.

However, a drop-down to the four-hour timeframe showed buyers’ attempts at a price rally with two successive bullish candles.

Technical indicators remained in alignment with the downward trend. The RSI indicator stayed under neutral 50 with a reading of 33.2, as of press time. The OBV also reflected DOT’s declining daily trading volume.

A mid-term recovery plan for bulls will involve a four-hour candle close above the $5.2 support level, followed by a 12-hour close above the same level. This could lead to a rally to the $6.1 price range.

On the flip side, a bearish candle close on either timeframe below the support level and bullish order block will signal more selling opportunities. Shorts can then target the December low of $4.2.

How much are 1,10,100 DOTs worth today?

Shorts retained dominance in the futures market

Source: Coinglass

The liquidation data for DOT over a three-month period showed that the markets were not yet priced in for a bullish reversal.

Longs have taken the most hits with large spikes in liquidated positions. Furthermore, data from Coinglass showed that $2.29 million worth of long positions were liquidated over the past five days. This represented 92% of total liquidations.

However, the funding rates stayed positive to signal a glimmer of hope for bulls. DOT’s correlation with BTC could determine its next move. A rally for the king coin will offer bulls a unique reversal opportunity again from the $5.2 support level.