Hello and welcome to another updated article about Polkadot (DOT). Things are getting a bit more interesting as we have seen a breakout from our bullish reversal pattern, highlighted in red as a descending wedge.
This was our earliest indication that a low might be in place. While this is far from a confirmation and certainly not a guarantee, it’s a positive sign given that the downside structure was technically complete.
Current Analysis
Until yesterday, I was still watching for another low, but now we may have bottomed. The next step would be certainty, but in financial markets, certainty is elusive. The downside structure is complete, and we were watching for a break above the upper boundary line of our wedge pattern, which has now happened.
Implications of the Breakout
This breakout suggests that the larger Wave 2 correction we’ve been monitoring could be complete, especially after the price reacted to the 61.8% extension level at $5.50 with a nice reversal candle. This could be wave five of C of Y.
Next Steps and Resistance Levels
With the break of the trend line, we now focus on the next resistance, which is likely at the upper trend line. I’ve highlighted this trend line in red as it has three touchpoints, making it more reliable.
We have also removed less relevant levels to keep the chart clean. The last support level remains at $5.50, and the next move up needs to form five waves reaching $6.50.
Indicators and Trend Lines
While analyzing an altcoin on a small timeframe isn’t always reliable, I’m using additional indicators like trend lines. The small green trend line, while not predictive, helps indicate when the initial rally might be over.
Wave Structure
The first wave needs to reach $6.50, with the third wave hitting the 1.38 extension at $5.97 at least, and the fifth wave reaching the 1.618 extension at $6.50. Once we see five waves reaching $6.50 or higher, we can add the support area for wave two.
Potential Trade Setup
If this one-two setup is completed, it could be an interesting Elliott Wave trade setup on a smaller timeframe. We are likely still dealing with the third wave, which should be followed by a fourth wave, potentially breaking the trend line.
Next Resistance
Pay attention to the highlighted trend line as a potential resistance around $6.50, depending on the timing of the price reaching it.
Conclusion
That’s the update on Polkadot. I hope you found this information helpful. If you did, please hit the like button and leave a comment!