Polkadot (DOT) price failed to break out of a major diagonal resistance line and dropped below a crucial horizontal area afterwards.
A long-term count indicates that the price has reached a long-term low and a new uptrend reversal has started. However, price action does not confirm this possibility yet.
Polkadot price failed to clear the resistance on the third attempt
Technical analysis of the daily time frame indicates an uncertain outlook. The reasons behind this assessment are based on factors such as price action and indicator readings.
First of all, DOT price lost the $5.20 horizontal level. The level has intermittently acted as support and resistance since the beginning of March.
While LINK seemed to pick it up again at the beginning of July, the rejection from the descending resistance line on July 3 (red icon) caused a bearish trend reversal.
This was the third rejection from the same line of resistance. The $5.20 area is now acting as resistance again.
The wave count indicates a bullish scenario. By analyzing repeated long-term price patterns and investor psychology, the Elliott wave theory suggests that DOT price has completed the characteristic ABC corrective structure (marked in black).
This supports the idea of a bottoming out, in line with the long-term double bottom pattern mentioned earlier.
After that, the daily relative strength index (RSI) gives an indefinite reading. Using the RSI as a momentum indicator, traders can determine whether the market is overbought or oversold and decide whether to accumulate or sell an asset.
Bulls have an advantage if the RSI reading is above 50 and the trend is bullish, but if the reading is below 50 the opposite is true. The daily RSI is at 50, signaling a neutral trend.
DOT Price Prediction: Short-term decline before reversing
A closer look at the number of waves on the short-term six-hour time frame indicates that DOT price has started a bullish reversal. However, an initial bounce will occur before the price resumes its rally.
Starting on June 10, the DOT price completed a five-wave rally and peaked at $5.63 on July 3. This corresponds to a long-term count and indicates that the DOT price has started an upward trend reversal. However, if the number is true, it also means that DOT is in corrective ABC structure now.
Fibonacci retracement levels work on the principle that after a significant price change in one direction, the price will correct or revisit the previous price level.
As DOT completed a five-wave increase, the price is likely to rebound to the 0.5-0.618 Fibonacci retracement support area at $4.75-$4.92 before resuming the long-term increase.
However, despite this short-term bearish prediction for DOT price, the increase above the top of the fifth wave at $5.63 would mean that the correction is over, and the trend is to the upside. DOT price could move to the next resistance at $6.50 in this case.
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In line with Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate and unbiased reporting, but market conditions are subject to change without notice. Always do your own research and consult with a professional before making any financial decisions.