Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion
- Polkadot has gained new support from $5.0
- Price recovery could be hampered by negative sentiment
After overcoming many supports, Polkadot DOT finally found a calm zone around $5.0 DOT was trading at $5.38 at press time, up 5% over the past 24 hours. The hike corresponded with BTC’s recovery of the $16k-level.
Read Polkadot’s [DOT] Price Prediction 2023-24
Despite price recovery at press, however, market structure was still weak. Therefore, DOT could continue falling to its new support of $4.4
New support at $5; can it hold?
Between October and November, DOT posted an impressive rally with an ATH ending at $7.42. The asset crashed due to bearish sentiment after the implosion of FTX.
It found support at $5.4, which was where the bulls tried two price recoveries. The two attempts to recover ended in a bearish block around the 23.6% Fib ($5.58). After the second attempt to recover, the price corrected below the previous support, making DOT a bearish market structure.
DOT was at the edge of a rally that would break the $5.3 level as of press time. However, the current bearish structure of the market could cause a price rally to push it towards $5 or as low at $4.44 in coming days or weeks. Relative Strength Index 38 was a sign that sellers have leverage.
The on-balance volume also has fallen to a series lows since mid September. Both show that the market remains weak and favors sellers.
The bearish bias will be null if DOT breaches the 23.6% Fib level ($5.58) at the intraday close. In such a case, the new resistance target for DOT would be a bearish order block zone surrounding the 38.2% Fib retracement.
A decline in development activity and negative sentiment
According to Santiment, DOT’s development activity bottomed out on 7 November before rebounding through mid-November. It continued to decline steadily after that, with a steep downward trend as of the writing. It is interesting that the price action correlated with development activity to a large extent.
The overall weighted mood was also negative at press time. Given the decline in trading volume as DOT’s price rises, the price-volume divergence may undermine strong buying pressure. This could indicate a price decline or deeper plunge.
DOT could keep its current rally if BTC holds $16,000 or surpasses $17,000 The price-volume divergence in BTC and negative sentiment could hinder any buying pressure that could make the market more upbeat.
DOT investors who are long-term should be cautious and closely monitor BTC, market sentiment and development activity.