DOT Traders Looking to Open Longs Should Watch Out, Here’s Why

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DOT Traders Looking to Open Longs Should Watch Out, Here’s Why
  • DOT recovered from its slide on December 19 and jumped to $8.45 
  • While the token’s momentum may increase upwards, there could be a reversal down to $7.50.
  • The DMI suggests that DOT could gain another 20%, putting it in pole position to hit $10.

The price of Polkadot (DOT) crossed the $8 mark on December 21, thanks to a 7.02% increase in the last 24 hours. The increase marked a moment of relief for DOT holders who endured a downtrend period between December 13 and 19.

During that period, selling pressure led the Polkadot native token to fall from $7.63 to $6.52. However, the $6.52 region quickly turned into support and was crucial to the DOT’s rise to $8.45.

DOT Is Not Stopping Yet

From the technical point of view, it does not seem like DOT would end its uptrend at $7 or $8. This was because of the Awesome Oscillator (AO) state as shown on the 4-hour DOT/USD chart. 

At press time, the AO was 1.02. With increasing green bars, the indicator showed that DOT was experiencing increasing upward momentum. Although DOT slightly fell to $7.92, there was a likelihood of rising back to the $8 region.

The reason for this assertion can be found in the Directional Movement Index (DMI). As of this writing, the +DMI (green) was 37.94, and the -DMI (red) was 16.25. The difference in these indicators implied that buyers were in control of the DOT price action.

Another indicator backing the position was the Average Directional Index (ADX). At press time, the ADX (yellow) was 30.15. Typically, an ADX reading of less than 25 suggests a weak directional movement.

But since the ADX here was more than 25, it means DOT’s directional movement was strong. Should this remain the same, then DOT might gain another 20% increase which could put in the $10 level.

DOT/USD 4-Hour Chart (Source: TradingView)

Bulls Should Play Their Cards Right

Furthermore, there is a high chance that the potential ride to $10 would not be linear. So, traders should expect some pullback possible to the $7.50 region. If DOT hits this price and profit-taking isn’t widespread, it could be a good entry for long positions.

Coin Edition took a look at DOT’s funding rate to assess if traders are bullish or bearish on the price action. According to the derivatives information portal Coinglass, Polkadot’s weighted funding rate was positive at press time.

Funding rates are payments made by long or short traders to the other side of the divide. This is done to keep their positions open. If the funding rate is negative, then shorts are paying longs, and the broader sentiment is bearish. 

DOT Funding Rate (Source: Coinglass)

So, DOT’s funding rate at 0.039% implies that most traders are bullish on the price action. In the meantime, DOT’s performance could be profitable for long. However, traders need to avoid using wide leverage margins as the token could reverse at some point.

Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.