Polkadot ($DOT ) is currently showing signs of bearish pressure as it forms an inverse cup and handle pattern on the daily chart. This pattern, often signaling a potential downside, suggests that DOT may struggle to sustain bullish momentum in the near term. Here’s a breakdown of what to watch for:
Bearish Formation: Inverse Cup and Handle
The structure of the pattern begins with a large, rounded top (the "cup") that indicates a loss of upward momentum. The subsequent consolidation forms a descending "handle" that could act as a bearish continuation signal. The key resistance zone sits around $7.50–$8.00, with DOT currently hovering around $6.82, down 3.06%.
Key Levels to Watch
Neckline Support: A crucial level of support is found near $7.00. If DOT breaks below this point, it would confirm the bearish pattern, setting the stage for further downside.
Measured Move Target: The projected downside target, based on the pattern’s height, points to a potential drop to $4.70, a significant decline from current levels.
Bearish Scenario: Breakdown or Bounce?
If DOT breaks below the neckline with strong volume, the selling pressure could intensify, bringing the price closer to the measured target of $4.70. The red arrow on the chart illustrates the expected trajectory if the support fails.
The Invalidation Scenario
However, if DOT manages to hold the neckline and breaks above $8.00, the bearish pattern would be invalidated, potentially paving the way for a bullish reversal. Traders should keep an eye on volume confirmation for any significant price movements.
Conclusion
Polkadot’s price action is at a critical juncture. The formation of an inverse cup and handle pattern indicates a bearish outlook, with a possible drop to $4.70 if the neckline fails to hold. For now, traders should closely monitor the support level and adjust their risk management strategies accordingly. Will DOT hold the neckline or break down further? The next few days could be crucial.
