Polkadot (DOT), a popular cryptocurrency in the blockchain space, is making waves thanks to its novel approach to interoperability and scalability. However, as with any financial asset, its price is subject to various technical analysis patterns, one of which is the rising wedge chart.
The formation of a rising wedge on the DOT price chart suggests that despite its recent upward trajectory, there may be a decline on the horizon. Traders and investors often look for confirmatory signals, such as a break below the lower base of the wedge, to confirm the validity of the pattern and anticipate potential selling pressure.
Currently, DOT’s price is down -0.13% to trade at around $7.13, with a market capitalization of over $10 billion and trading volume of over $153 million at the time of writing. Although the company’s market capitalization decreased by 0.39%, trading volume increased by 0.34% over the last day.
Using the 100-day Plain Moving Average (SMA) and Relative Strength Index (RSI), this analysis was performed on both the 4-hour and daily time frames.
Analytical view of the current state of DOT prices
Currently on the 4-hour chart, DOT continues to move in a consolidative fashion, with the upper base and lower wedge base building momentum below the 100-day elementary moving average.
The 4-hour Relative Strength Index signals that DOT price may fall below the lower base of the wedge as the RSI line is trending just below the 50% level. From this RSI pattern, it can be suggested that if the DOT breaks below the wedge, it will begin to move down towards the nearest key support level.
Meanwhile, on the 1-day chart, the DOT price is trending within the wedge, but close to the lower base. The one-day RSI also suggests that DOT may decline as the RSI line tries to break below the 50% level. With this RSI pattern, traders are advised to watch for a break below the wedge before taking any sell positions.
Potential price action in the event of a breakout
Currently, the price of the crypto asset continues to trade within the wedge, and DOT will begin to decline towards the $4.8 support level in the event of a break below the wedge. If the price drops below the above level, it may drop further to test the $3.5 support level.
On the other hand, if the price reverses course and breaks above the upper base of the wedge, it will start rising towards the $9.8 resistance level. If it breaks above this level, Polkadot will move higher, testing the resistance level at $11.9. Additionally, DOT may see stronger growth to be able to test more frequently significant levels if it closes above $11.9.
Featured image from Adobe Stock, chart from Tradingview.com
