Polkadot [DOT] traders can use THIS strategy to navigate DOT’s downturn

The recent price movements of Polkadot [DOT] have unveiled a significant bearish trend. The cryptocurrency approached its long-standing support level and retraced back to levels last seen in 2020.

At the current moment, DOT was valued around $3.85, showing an increase of close to 2% over the past 24 hours. Nevertheless, the overall trend remained bearish. Amid continuous selling pressure, can potential buyers muster the momentum needed to reclaim crucial resistance levels?

Struggling at a Key Support Level

Polkadot [DOT] has experienced a sharp decline in the past few months, repeatedly failing to surpass the $4.9 resistance level. Presently, the altcoin was trading significantly below the 20-day EMA ($4.05), 50-day EMA ($4.22), and 200-day EMA ($5.23).

The persistent rejections from these moving averages, alongside the struggle to breach the six-month trendline resistance (marked in white, dashed), have heightened the selling pressure. The recent drop of DOT below the $3.9 support level (now acting as resistance) has brought it closer to its multi-year low of approximately $3.6 – a crucial level to monitor.

The price movements of DOT indicated a high level of volatility in the near term. Should the cryptocurrency gather enough bullish strength to rise above the $3.9 resistance level once more, it might be able to challenge the 20/50-day EMAs. Reclaiming these EMAs is pivotal for buyers to establish an upper hand in the short run and could potentially pave the way for testing higher resistance at $4.9.

Nevertheless, the bearish sentiment continued to prevail due to the overall downtrend. A drop below the essential $3.6 support could expedite the decline and push DOT towards exploring new lows.

Additionally, the Relative Strength Index (RSI) recorded a value of 40 at the time of observation. Notably, the RSI’s recent trend of higher lows suggested a bullish divergence with the lower lows in the price action.

Crucial Levels to Monitor

Support: The immediate support level was identified at $3.6 – a psychological multi-year low. Breaching this level could trigger further downturn.

Resistance: The initial resistance level to monitor stood at $3.9, succeeded by the 20-day EMA at $4.05 and the 50-day EMA at $4.22. A definitive breakthrough above these levels might offer DOT buyers an opportunity to regain some control in the market.

Insights from Derivatives Data

Derivatives data portrayed mixed sentiments among DOT traders. The 24-hour long/short ratio indicated a figure of 0.9029, slightly favoring short positions and implying a sense of caution among traders. Nonetheless, the long/short ratios on Binance and OKX were notably bullish, with Binance at 4.7013 and OKX at 3.58 – a hint that traders on these platforms may be optimistic about a potential recovery.

Traders are advised to closely monitor broader market trends, particularly the movements of Bitcoin.