Polkadot ‘cup and handle’ setup sees DOT price 50% higher in September


Polkadot (DOT) looks poised to extend the ongoing price recovery thanks to a classic bullish pattern on the daily chart.

DOT paints “cup and handle” pattern

Notably, DOT has formed a “cup and handle” pattern since mid-June, confirmed by the price decline and recovery in a rounded, U-shaped trajectory (cup), followed by the development of a trading range on the right side (handle).

DOT/USD daily price chart with “cup and handle” breakout setup. Source: TradingView

Cup and handle patterns are typically bullish continuation configurations that form during an uptrend. But in rare cases, they appear at the end of a downtrend, leading to a bullish price reversal. As a result, DOT seems likely to continue its price recovery.

So, from a technical perspective, DOT initially sees a breakout above its cup and the handle resistance line near $8.50.

A decisive close above the resistance line, i.e. a breakout accompanied by an increase in volume, could target around $12 for the DOT in September, up more than 50% from its current price. .

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Set up Polkadot price analysis

However, the road from DOT to $12 risks exhaustion due to the presence of key technical resistance levels midway through.

For example, the Polkadot token could reach its 100-day simple moving average (100-day SMA; the purple wave) near $9.50 and then pull back to $8.50. This outlook is based on DOT’s July 31 price decline of the same wave resistance (marked by a circular sign below).

DOT/USD daily price chart. Source: TradingView

Meanwhile, a breakdown below the cup’s round support could invalidate the bullish cup and settle the setup altogether.

As a result, DOT could risk an extended price correction towards $6.25, which has been supporting multiple downturns since June 13. In other words, the DOT could drop nearly 20% from its current price by September.

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Polkadot Network Stats Show Stability

Along with the broader market, Polkadot experienced a sharp decline in its market capitalization, mainly due to macroeconomic turbulence. As of August 2, the project’s net worth was $7.92 billion, compared to the all-time high of $55.51 billion in November 2021.

By comparison, Polkadot’s network stats are healthier. For example, it saw 145,000 monthly users in Q2/2022 versus 149,000 monthly users in Q1/2022, according to Messari’s quarterly DOT report in July.

Polkadot account and transfers. Source: Messari/Subscan

Similarly, DOT transfers remained almost the same quarter on quarter, averaging 293 million per month in the second quarter versus 288 million in the first quarter. Interestingly, the peak bills and transfers in November 2021 were due to inaugural parachain auctions.

Stable network activity underscores consistent organic demand for DOT tokens. Nevertheless, it remains significantly below its all-time high, meaning Polkadot should do more to attract new projects to its parachain network.

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XCM launch and award

Nicholas Garcia, a researcher at Messari, says Polkadot could gain more adoption with its Cross-Consensus Message Format (XCM). This recently launched tool allows parachains to pass messages to each other.

Related: Polkadot Founder Announces Steps Toward Full Decentralization With New Governance Model

“Developing new functionality and usage scenarios will show the power of the network and can rekindle user interest and activity,” noted Garcia, adding:

“Polkadot should continue to onboard parachains and connect them to XCM.”

Web3 Foundation, which oversees grants for Polkadot, approved 415 projects in late July, ranging from development tools and wallets to smart contracts and user interface development. The move creates further potential demand for DOT.

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