Polkadot executed a timid price rebound of the June 22 low, traversing a bear flag pattern marked by no end of the daily commitment and well below-average trade volume. Today’s decline may force a breakout from the pattern, putting DOT price on course to record a 40% move from the flag’s lower trend line.
Polkadot price recorded one of the largest 2Q declines at 56%, shredding the support level offered by the 200-day simple moving average and most key Fibonacci retracements. The DOT price response to the second quarter collapse was a corrective price rebound of 40%, illustrating a bear flag pattern on multiple timeframes.
The measured move of the bear flag pattern is approximately 40%, presenting a Polkadot target of $8.85. A decline of that magnitude would overwhelm the layers of support level provided by the May 23 low of $13.59, the June 22 low of $12.75, and the 78.6% retracement of the rally beginning in August 2020 at a price of $11.96. In fact, the drop would nearly eliminate all the gains achieved by DOT in 2021, representing a major setback for the cryptocurrency.
If Polkadot price registers a daily close below the flag’s lower trend line level, currently at a price of $14.70, it will have an inevitable bearish outcome for DOT. A spike in trade volume should accompany the breakout, further confirming the bearish forecast.
Adding some validity to a projection of a 40% decline is that the Polkadot price recently plunged by a similar percentage between July 19 and July 22 after a breakout from a symmetrical triangle. Thus, the precedent is in place for another Polkadot sell-off.
A daily close above the flag’s upper trendline, currently at a price of $17.90, would negate the bearish forecast and suggest that the DOT price seeks at least a test of the declining 50-day SMA at $20.24. Any further DOT price upside will be challenged by the downward pressure of the moving average and the recent bearish Death Cross pattern triggered on June 27.
To be sure, the Polkadot price has established the precedent of sharp, outsized declines since the top on May 15, and it should not be ignored. Hence, market operators have nothing to lose by being patient until the bear flag pattern level resolves and reaches the ground floor. Of course, they could be stubborn and stand in the way of another 40% downturn.
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