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

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Techniques from the Polkadot (DOT) chart suggest it could hit a new high near $ 75 if DOT manages to close above its $ 41- $ 43 range decisively.

This is in a classic bullish reversal pattern known as an inverted head and shoulders (H&S) that forms when price experiences three massive selloffs during a period of market consolidation.

Specifically, the model contains an initial sell-off, followed by a short-term price rally and another deeper sell-off. This leads to another small upward correction, followed by another close-out which hits the lowest level near / at the lowest level of the first liquidation.

Illustration of inverted head and shoulders pattern. Source: ThinkMarkets

The first and last sale represent the “left” and “right” shoulders respectively, while the second sale represents the “head”. On the other hand, the level around which all the ephemeral rallies culminate represents the “neckline” of the head-shoulders pattern.

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Traditional analysts usually calculate the H&S bullish target from the resistance of the neck line by measuring the maximum distance between it and the formation of the head.

So, it looks like Polkadot has formed a similar uptrend on its weekly chart as shown below.

DOT / USD weekly price chart with inverted head and shoulder setup. Source: TradingView

The maximum distance from the DOT cleavage to the bottom of the head is almost $ 31. Therefore, a successful bullish breakout above the neckline range of $ 41 to $ 43 places the next long-term target at around $ 75.

Upcoming Parachain Auctions in November

The reverse H&S pattern emerged as DOT rose nearly 30% last week to a five-month high at around $ 44. At the heart of its weekly uptrend was a surge in prices in the crypto market, as well as the announcement of the first Polkadot parachain auctions launched on November 11.

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In detail, Polkadot’s parachains are parallelized, application-specific strings – child registers attached to a single parent register called the relay chain. Due to their parallel nature, parachains tend to process multiple transactions simultaneously and keep and record their data in the main ledger by communicating with other chains.

Related: Polkadot To Launch Parshain Auction After Governance Vote

This comes as a departure from the method of queuing transactions and processing them sequentially.

DOT, which serves as a utility token for fees, governance, interoperability and bonding within the Polkadot ecosystem, rose more than 24% after the announcement of the parachain auction.

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Next, Polkadot aims to introduce a cross-chain functionality that will allow its relay chain to connect to external blockchains (Bitcoin, Ethereum, etc.) via specialized smart contracts. Meanwhile, the project also plans to launch “integrated bridging modules” that will improve the interoperability of external blockchains with Polkadot.

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