Analyzing Polkadot’s head and shoulders – Is a drop to $3.47 likely?

Polkadot formed a bearish head and shoulders pattern on its one-day chart, which could precede a drop to $3.47
Polkadot’s network activity has also declined significantly lately

As an analyst with years of experience in the crypto market, I must admit that Polkadot (DOT) has been a rollercoaster ride lately. While it’s impressive to see DOT climb by 16% in just seven days, the bearish signs are hard to ignore. The head and shoulders pattern on its one-day chart is a red flag that could signal a potential drop, especially if the resistance at $7.56 continues to hold strong.

Currently, Polkadot (DOT) is being exchanged for approximately $7.20 per token, marking a 2% increase over the past day. However, it’s worth noting that the trading volume of this altcoin decreased by 9%, reaching $290 million on the charts.

Over the past week, Polkadot has experienced an increase of 16%. However, there are indications on its one-day chart suggesting a possible downturn, hinting at potential corrections in the near future.

Polkadot forms a head and shoulders pattern

On its one-day chart, Polkadot appears to have developed a “head and shoulders” formation, typically indicating an impending strong downward trend in price, often referred to as a bearish move.

After experiencing some positive price movements, DOT has been trying to push up against a significant barrier – the neckline. Yet, on multiple occasions, it has failed to do so, implying that potential buyers haven’t shown much interest at this resistance level.

If this resistance level holds strong and DOT is unable to break through, sellers will likely enter the market, triggering an over 50% drop towards $3.47.

As a crypto investor, I noticed that the Chaikin Money Flow (CMF) was heading downwards, indicating a stronger sell-off compared to purchases. This trend signified a bearish movement that might drive the price of DOT even lower.

The fading histogram bars on the Bollinger Band Trend indicator also suggested the bullish momentum was weak. This could also pave the way for a downtrend, if buyers fail to re-enter the market.

Potential buyers might be waiting for a significant price surge over the $7.56 mark before they jump in to buy new positions of DOT. Should this occur, DOT’s price may potentially rise towards its next potential resistance at around $9.20.

Declining network activity could hinder gains

The activity on the Polkadot network has decreased, potentially slowing down potential profits. As reported by TokenTerminal, key network indicators like revenue and user count are currently at their lowest points in several weeks.

As a researcher, I’ve noticed an alarming dip in our network’s daily active users, which has dropped to approximately 4,200 – the lowest in the last 30 days. Simultaneously, our daily revenues have plummeted to $1,118, suggesting a decline in user engagement on the platform.

If the network doesn’t show an increase in activity, it might bolster downward price trends for DOT, causing its prices to decrease on the graphs.

DOT’s liquidation heatmap suggests…

At the moment examined, Polkadot’s liquidation map doesn’t show any immediate liquidation thresholds either just above or below the present price. This situation might lead traders to be less eager to sell, potentially causing the price to stabilize or hold steady, a phenomenon known as consolidation.

Despite this, a ‘meltdown’ area exists at $6.80, implying that if the price drops to this point, it might trigger a chain reaction of forced selling by long-term investors, potentially driving the price down further.

2024-12-28 02:15

Polkadot forms a head and shoulders pattern

Declining network activity could hinder gains

DOT’s liquidation heatmap suggests…

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