- Polkadot dances within the confines of a rectangle pattern ahead of a possibly massive upswing.
- Technical levels on the daily chart continue improving as bulls look forward to resuming the uptrend above $40.
Polkadot trades in the green like most of the cryptocurrencies in the market. The need for recovery comes after the price dived to $25 in April. Similarly, the failure to break the resistance at $40 led to a surge in overhead pressure and a drop to $32.
At the time of writing, DOT teeters at $39.9 as bulls battle to clear the resistance at $40. The applied technical levels and indicators show that the slightest resistance path is north.
Polkadot consolidates in a rectangle ahead of breakout
The daily chart shows the formation of a rectangle. This technical pattern develops when the price hits the same horizontal resistance and support levels numerous times. Therefore, the price is restrained within the boundaries, forming a rectangle, as illustrated.
It is worth noting that a rectangle pattern highlights indecisiveness among investors regarding the long-term trajectory of the asset. The price tends to rises and fall within the pattern, unable to extend action either up or down.
DOT/USD daily chart
A break above or below the rectangle would result in a new trend. However, not all breakouts yield massively. Meanwhile, Polkadot has settled above the 50-day Simple Moving Average (SMA), suggesting that the path with minor hurdles is upward.
At the same time, the Moving Average Convergence Divergence (MACD) has a bullish outlook. For example, the indicator recently crossed into the positive region, a bullish signal. To drive the bullish point home, the MACD line (blue) has also extended the action past the signal line. As long as this technical picture remains unchanged or improves, the uptrend will be sustainable.
Consequently, a break above the rectangle pattern could trigger massive gains toward new all-time highs of $50. A confirmed break above $40 may also encourage investors to join the market in anticipation of gains to higher levels.
Looking at the other side of the fence
It is worth mentioning that the rectangle pattern may fail to result in a massive upswing because Polkadot could run out of steam to follow through the breakout. Another correction will come into the picture if the 50-day SMA support crumbles.
This will put pressure on the rectangle’s lower boundary support. If the anchor zone is shattered, the bearish leg may explore levels under $30 and toward the crucial support at $25.