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Polkadot eyes $75 after DOT price rally sets off classic bullish reversal

Polkadot (DOT) chart technical shows that if DOT manages to close its $41-$43 range decisively, it could rally to a new all-time high near $75.

This is in accordance with a classic bullish reversal setup known as an inverse head and shoulders (H&S), which is formed when the price goes through three selloffs during a period of market consolidation.

Specifically, the pattern consists of an initial selloff, followed by a short-term price rally and a second – deep – selloff. This leads to another minor correction on the upside, followed by another selloff near/below the lows of the first sell-off.

Inverted head and shoulders pattern illustration. Source: ThinkMarket

The first and last sales represent the “left” and “right” shoulders, respectively, while the second sales represent the “heads.” On the other hand, the level around which all short-term rallies have topped represents the “neckline” of the head and shoulders pattern.

Traditional analysts typically calculate the H&S upside target by measuring the maximum distance between it and the head formation from neckline resistance.

Therefore, it appears that Polkadot is forming a similar bullish pattern on its weekly chart as shown below.

DOT/USD weekly price chart featuring an inverted head and shoulders setup. Source: TradingView

The maximum distance between the DOT’s neckline and the bottom of the head is about $31. Therefore, a successful bullish breakout above the $41-$43 neckline places the next long term target at around $75.

Parachain auction to be held in November

A reversal H&S pattern has emerged as DOT gained nearly 30% last week to hit a five-month high at around $44. The crypto market was at the core of its weekly uptrend, with the news of Polkadot’s first Parachain auction going live on November 11th.

In detail, Polkadot’s parachains are parallel, application-specific chains – child ledgers connected to a single parent ledger called the relay chain. Due to their parallel nature, parachains process multiple transactions simultaneously and maintain and record their data on the main ledger by communicating with other chains.

RELATED: Polkadot Will Start Auctioning Parachain After Governance Votes

This comes as a break from the way transactions are queued and processed sequentially.

DOT, which serves as a utility token for fees, governance, interoperability and bonding within the Polkadot ecosystem, surged over 24% following the announcement of the Parachain auction.

Subsequently, Polkadot aims to launch a cross-chain feature that will enable its relay chain to external blockchains (Bitcoin, Ethereum, etc.) At the same time, the project also plans to launch an “in-built bridging module,” which will enhance the interoperability of external blockchains with Polkadot.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, so you should do your own research when making a decision.

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