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Polkadot (DOT) has found new support at $5.0
Negative sentiment can undermine an effective price recovery
After breaking through several supports, Polkadot (DOT) finally found a calm zone at $5.0. At the time of writing, DOT was trading at $5.38, up 5% over the past 24 hours. The increase coincided with BTC’s recovery from the $16k level.
Read Polka Dots [DOT] Price Forecast 2023-24
However, despite the price recovery at the time of writing, the market structure was still weak. Therefore, DOT could continue to fall towards its new $4.4 support.
New support for $5; will it hold?
DOT recorded an impressive rally between October and November, ending with an ATH of $7.42. However, the bearish sentiment following the FTX implosion caused the asset to crash.
It found a support zone at $5.4, from which the bulls attempted to recover the price twice. However, the two recovery attempts ended in a bearish order block around the 23.6% Fib level ($5.58). A price correction after the second recovery attempt fell below the previous support, turning DOT into a bearish market structure.
At the time of writing, DOT was on the verge of a rally to break the $5.3 level. However, the current bearish market structure could push the price towards $5 or as low as $4.44 in the coming days or weeks. The Relative Strength Index (RSI) stood at 38, showing that sellers are leveraged.
Balance sheet volume has also reached a series of lows since mid-September. Ergo, both show that the market is still weak, in favor of sellers.
However, the bearish bias will be invalidated if DOT breaks through the 23.6% Fib retracement level ($5.58) on the intraday close. In this case, DOT’s new resistance target would be the bearish order block zone around the 38.2% Fib retracement level.
Negative sentiment and declining development activity
According to Sanitation, DOT’s development activity bottomed out on November 7, before recovering to mid-November. After that, it declined steadily, with a steep downtrend at the time of writing. Interestingly, price action followed development activity to a significant degree.
In addition, the overall weighted sentiment was in negative territory at the time of writing. Given the decrease in trading volume as the price of DOT rises, the price-volume divergence may undermine strong buying pressure. This could indicate a possible price drop or a deeper dive.
If BTC holds on to $16,000 or breaks through $17,000, DOT could continue its sustained rally. However, the divergence between price and volume and the negative sentiment could undermine any significant buying pressure that could turn the current market structure into an uptrend.
Long-term investors of DOT should therefore exercise caution and keep an eye on BTC, market sentiment and asset development activity.
This post DOT traders should consider reading this before making a move
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