Polkadot is preparing to finalize the end of a multi-week consolidation beginning with a rare but powerful, DOT bullish engulfing week. If DOT price remains above last week’s high at $44.99 through the weekend, it will confirm a new price uptrend for the 8th largest cryptocurrency by market capitalization.
It was an eventful beginning to 2021, as DOT price rallied over 700% into the February high, securing its position as one of the largest cryptocurrencies. Since, DOT price action has been mixed and sideways, with brief new highs in April failing to galvanize investor enthusiasm.
A couple of weeks ago, it appeared that Polkadot was beginning to shape the right shoulder of a massive head-and-shoulders top, but this week’s price surge has disrupted the pattern symmetry and forced a rethink of the outlook.
If Polkadot does close the weekend above the price of $44.99, thereby triggering a bullish engulfing week, it will raise the odds that Polkadot will pierce the topside trend line, leaving the altcoin free to touch much higher prices.
A bullish engulfing week is formed when the current week’s DOT price low undercuts the previous week’s low and reverses higher to close above the last week’s high. It signals that the remaining weak and impatient Polkadot holders have been expelled, and the digital token’s investor base is being populated by investors that are more committed.
It is important not to underestimate the power of long-duration price consolidations like the one for DOT. Two examples are the MATIC price breakout at the end of April from a six-week consolidation that has earned a 200% for investors and the Cardano price breakout this month from a nine-week consolidation that has rewarded investors with a gain of over 30%.
Moving forward, Polkadot's price needs a weekly close above the price of $44.99 on Sunday to activate the bullish thesis. The first resistance level is the topside trend line at $53.72 and then the 161.8% Fibonacci extension of the April price correction at $63.63. Bigger aspirations will target the 261.8% extension of the April correction at a price of $87.00, generating a 60% return from the topside trend line.
Polkadot's price could ruin the outlook by closing below the price of $44.99 on Sunday. An initial support level will materialize at the tactically important 10-week simple moving average at a price of $37.95. A spike in selling pressure will put the 50% retracement level of the 2021 rally at $26.85 on the radar, a level that offered support twice during the price consolidation.
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