Polkadot eyes breakout to $75 after DOT price rally sets up classic bullish reversal

Polkadot chart technicals indicate that it could rally to a new high near $75, if the DOT can close above its $41–$43 range.

This is based on a bullish reversal setup called an inverse head & shoulders (H&S). It occurs when there are three selloffs in a period of market consolidation.

The pattern includes an initial selloff followed by a short-term rally in prices and a deeper selloff. This leads to a small correction to the upside and then another selloff, which bottoms at or near the lowest point of the initial selloff.

Illustration of the inverted head and shoulders pattern. Source: ThinkMarkets

The “left” and the “right” shoulders represent the first and final selloffs, respectively. The “head” is the area around which all short-lived rallies peak out.

Traditional analysts calculate the H&S upside target by taking the distance between the neckline resistance and the head formation.

It appears that Polkadot is following a bullish pattern as seen below on its weekly charts.

Weekly price chart for DOT/USD with inverse head-and-shoulders setup. Source: TradingView

The distance between DOT’s neckline (and the head’s bottom) is almost $31. A bullish breakout above the neckline range between $41-$43 would place the next long-term target at $75.

November Parachain auctions

The inverse H&S trend emerged this week as DOT rose by nearly 30% to reach a 5-month high of $44. The price boom in crypto markets and the news that Polkadot’s parachain auctions went live on Nov. 11 were the key to the weekly uptrend.

Polkadot parachains, which are application-specific, parallelized chains, are child ledgers that are tied to one parent ledger, the Relay Chain. Parachains are parallel in nature and can process multiple transactions at once. They also communicate with other chains to maintain their data and to record them on the main ledger.

Related: Polkadot will launch parachain auctions following the governance vote

This is a departure from the traditional method of processing transactions sequentially and queuing them up.

Parachains will launch on Polkadot 5 years after the Polkadot Whitepaper first described the idea of a heterogeneous multichain structure. Motion 118, to schedule the first auctions, has passed council & now gone to public referendum.https://t.co/8pt3aT4vO3
— Polkadot (@Polkadot) October 13, 2021

After the announcement of the parachain auction, DOT rallied more than 24%.

Next, Polkadot plans to introduce a cross chain feature that will allow its Relay Chain access to external blockchains like Ethereum, Bitcoin, and so on. Through specialized smart contracts. The project plans to also launch “in-built bridge modules”, which will improve the interoperability between external blockchains and Polkadot.

com. You should do your research before making any investment or trading decision.
https://cointelegraph.com/news/polkadot-eyes-breakout-to-75-after-dot-price-rally-sets-up-classic-bullish-reversal

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