Polkadot presents a possible range formation

Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion.

• Polkadot has a bearish market structure in the short term.
• A reversal was not likely as things stand but the price was within a higher timeframe area of interest.

Polkadot [DOT] saw a strong rally in June that saw the prices go from $4.2 to $5.5. The bulls tried to breach this level, but were unable to close a daily trading session above the $5.56 resistance level.

Read Polkadot’s [DOT] Price Prediction 2023-24

In August, the price began to trend downward as sellers strengthened their hold on the market. But things could begin to change as DOT enters a demand zone. Can the bulls reverse the past month’s losses?

Polkadot was trading within a higher timeframe area of interest

Source: DOT/USDT on TradingView

DOT had a bullish order block from the 1-day chart at the $4.5 area. To the south, the $4.22 level was a significant support level. It was a level that Polkadot rallied from in early January this year. Therefore, this was an area of interest where a bullish reversal could occur.

The indicators did not support this idea at press time. The OBV has been in a downtrend over the past week, showing high volumes of DOT sold. The RSI was also beneath neutral 50 and outlined bearish momentum. Moreover, the price and the RSI were making a hidden bearish divergence.

This showed that further losses were likely. The H4 chart showed that a recent lower high was at $4.56. A move past this level would break the market structure and flip it bullishly. This would be the first step toward recovery and can serve to alert traders of a possible long trade.

Invalidation of this idea would occur if DOT fell below the $4.4 short-term support, as it would indicate bulls were weak.

The market sentiment remained bearish as selling pressure continued

Source: Coinalyze

The Open Interest chart showed that there was not a notable capital influx over the past week. During this time, DOT did not see a significant trend develop in the short-term charts. The inference was that speculators were not convinced the conditions were bullish yet.

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This finding was backed by the technical indicators and the price action. The spot CVD was also in a downtrend, highlighting the steady selling that Polkadot faced.

While it could change and a move higher could occur, traders can wait for a bullish structure break before looking for opportunities.