Polkadot Tests Critical $2.26 Support as RSI Hits Oversold Territory for First Time Since August
Market Structure Shifts Lower
- The Polkadot (DOT) token is undergoing a correction, falling 23.9% this month.
- This loss nullified the three months of gains that were established in the October to December period.
- The last time we had such a drop in DOT was in the month of August when the token lost 27.33% of its value in a month.
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Over the last 48 hours, DOT bulls have done a reasonable job of defending this important level, while price has sat within the two previous weekly candles. As both accumulations and liquidations storm the market, this may be enough to see the market trap a little more supply under the nearby resistance level at $2.36. However, bulls must now muster a significant defense of these lows if price is to continue holding within this tightening weekly price structure.
| Metric | Value |
|---|---|
| Asset | POLKADOT (DOT) |
| Current Price | $2.26 |
| Weekly Performance | -3.42% |
| Monthly Performance | -23.91% |
| RSI (Relative Strength Index) | 38.8 |
| ADX (Average Directional Index) | 38.5 |
| MACD (MACD Level) | -0.20 |
| CCI (Commodity Channel Index, 20-period) | -80.83 |
RSI Drops to 39.97 – First Oversold Reading Since August’s Washout
With the oscillator recycling lower, fear it recycling back toward last year’s lows taking the DOT price tag along with it. Sellers will want to see this key psychological $30 level fail to hold, setting in motion the next wave of panic selling down through $25.00 and possibly even as low as $21.00. We’re not calling for this low of a price, but it’s the measured target if things get out of control.
For swing traders, this oversold bounce setup is almost an exact replica of what we saw in August. It’s the same RSI level, a volume signature that is reaching exhaustion, and similar over market structure. The only difference this time is that DOT did not inspire the true belief in the Wyckoff spring, indicating that the spring was potentially invalidated, or we are just going through a more extended shakeout before proper accumulation is expected to begin. Repeatedly, RSI readings below 40 on DOT have nearly always marked in the vicinity of significant bottoms, but only in conjunction with convincing volume based capitulation and reclaiming moving averages.
ADX at 38.52 Confirms Mature Downtrend Nearing Exhaustion Point
Indicators that measure the strength of a trend are showing very high numbers. For example, the ADX has increased to 38.52. When this number is higher than 25, it typically means that the market is showing a clear trend and it’s not just moving sideways. This drop in price is not just people taking profits; it’s moving with strength in a specific direction and those moves tend to come close to an end when reaching these levels. The weekly ADX is even higher at 50.24.
By considering incremental resistance levels, the primary one coming that jumps out is $0.30. This is home to the weekly 20-EMA and provided support in July before 24% drew the wick of a candle bear test the lows on relentless bounce.
Stepping back and looking at the bigger picture, this swing low is imperative to hold if bulls still want to retain hope for more upside. Breaking $0.30 could expose the recent bottom at $0.245, and subsequently range lows around $0.17.
20-Day EMA at $2.43 Becomes First Resistance After Month-Long Support Break
The daily RSI is currently sitting at 40 – ample room to continue lower before any threat of oversold conditions, while the 12-day moving average convergence/divergence (MACD) line is free-falling and hasn’t yet shown any slowdown in negative momentum. Volume has been waning over the past week as price failed to hold inside the tightening range outlined in the previous analysis. A decline back to $2 is looking increasingly likely as the market attempts to flush out over-leveraged longs.
On a monthly chart, the 10-month EMA is at $3.46 which is approximately 53% more than the current price. Such a huge difference between the spot price and the long-term averages has not been witnessed since the lows of the 2022 bear market. Nevertheless, historically, such extreme variances tend to indicate capitulation levels. But to begin even thinking about a recovery, the bulls will have to scale above the 20-day EMA. The previous support of $2.43 will act as the initial resistance on any relief rally.
Support Cluster at $2.26-$1.96 Defines Make-or-Break Zone for Bulls
The strong weekly S1 support may ultimately hold, and with 11 out of 13 of the candles since the March low closing above their sim corresponding to S1, there is plenty of evidence to suggest a strong potential for a low to be locked in sooner rather than later. The opposing factor comes in the form of the same 35-zone acting as resistance for price for five weeks straight – a failure to regain that level and challenge the weekly pivot at $3, would likely see price sweep to new lows.
There’s lots of resistance on the way up, starting at the monthly pivot ($2.64) with that psychological $3.00 level and the weekly R1 sitting on top of it. Next is the monthly R1 at $3.10 and monthly R2 at $3.56, along with the 50-day and 100-day EMA. That’s a ton of potential overhead supply, and the best thing that bulls would be hoping for in the medium-term would be some back-and-fill consolidation to let these moving averages catch up to price.
The VanEck Bitcoin Trust and Valkyrie’s physically backed Bitcoin ETFs have started exchanging on the exchange. Much of the interesting movements in the bitcoin market are being overshadowed by a strong negative correlation with the stock market. Crypto is supposed to be uncorrelated to traditional finance, but it does not feel like that is consistent with the facts on the ground.
Bulls Require Daily Close Above $2.43 to Shift Momentum
Buy-side order flow has been strong, suggesting that demand for PNT trading exposure is substantial, but on-chain metrics paint a concerning technical picture. Clarity around overshoot boundary testing, driven by governance concerns and panic selling rather than systemic issues, should gradually shift trader bias back to the upside, particularly in light of the potentially significant barrier at the $1 level if breached.
The bearish situation would be activated if the daily closing price drops below $2.20. This would signal a breakout from the support level of the past six months and would probably push the price down to the yearly minimum of $1.96. This dynamic could trap late buyers in the Wyckoff accumulation phase and push prices down to the $1.50-$1.75 range, where the high-volume nodes from 2023 are located. In order to confirm that actual sales are taking place and that this is not simply another search for liquidity, the volume would need to increase significantly in the event of a decline.
Because of the extreme oversold conditions, mature downtrend exhaustion signals, and multi-month support at these levels, the most likely short-term direction is a relief bounce into the $2.43-$2.64 resistance area before the larger trend takes over again. The failed Wyckoff spring should keep you honest; even the perfect setups don’t work without the market in your corner.
