Polkadot hits oversold extremes: is a rebound imminent?

Polkadot is approaching extreme oversold conditions after a relentless downtrend. With RSI nearing historic lows and price resting on major liquidity, a reversal rally could be on the horizon.

Polkadot (DOT) has endured a steep and persistent downtrend, with its price sliding from $7.67 to a fresh swing low near $3.25. This prolonged decline has pushed the asset into oversold territory on key indicators like the RSI, sparking interest in a potential reversal setup. The market is now watching to see whether a bottoming structure will emerge at these critical levels.

Key technical points

• Swing Low Support: Around $3.25, major resting liquidity
• High Time Frame Support: $3.75 — a reclaim level to confirm bullish intent
• Resistance Zone: $5 region, aligned with value area high
• RSI Signal: Approaching historical lows, previously led to local rallies
• Volume Behavior: Low during recent sell-off, indicating potential capitulation

DOT’s bearish structure began at the $7.67 level and has continued unbroken for weeks, culminating in the formation of a new swing low around $3.25. This level is now a key point of interest, as it represents an area of resting liquidity that often draws price action before a reversal.

Since reaching this low, DOT staged a brief oversold rally, tapping into resistance at the $5 mark, a level now reinforced by its confluence with the value area high. However, that bounce was short-lived, and price action has returned to the lows, where sentiment remains notably bearish.

Despite this, technical indicators suggest exhaustion in the trend. The RSI is now flirting with historical lows, regions that have previously triggered impulsive, albeit short-lived, rallies. These typically occur once price forms a bottoming structure or triggers a liquidity sweep below key levels.

The current scenario sets the stage for a potential swing failure pattern. If price takes out the $3.25 swing low but swiftly reclaims the $3.75 support, it could trigger a sharp reversal back toward the $5 resistance. This would align with previous behavior, where DOT bounced from oversold zones with conviction.

Volume also supports this thesis. The latest leg down has occurred on significantly lower volume, typical of final-stage capitulation. This creates a setup where a spike below support, without follow-through, could trap late sellers and ignite a counter-trend rally.

What to expect in the coming price action

DOT is now at a make-or-break level. If a swing failure pattern confirms around the $3.25 low, the next move could be a sharp rally toward $5. However, failure to reclaim $3.75 with conviction would signal continued weakness. All eyes remain on this critical support zone.