11 May 2021 (TUE)- Polkadot (DOT) Daily Risk Report

11 May 2021 (TUE)- Polkadot (DOT) Daily Risk Report

By quantdoge | Daily Crypto Risk Report | 11 May 2021


Investment Disclaimer:

  • I am not a registered investment, legal, or tax adviser or a broker/dealer, and all opinions expressed by me are from my research for educational purposes only.
  • Past performance presented here is not an indicator of future performance.
  • This post expresses my own opinion about the cryptocurrency mentioned herein and is not an offer to buy or sell, or a solicitation of any offer to buy or sell the cryptocurrency mentioned in this post. 
1. Top 2 Good News for DOT HODLERS !!!

2. How Polkadot Performs Relative to Other Cryptos ?

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As of 11 May 2021, Polkadot has made a cumulative return of 1185.39% since Jan 2020 and 443.93%  since Jan 2021. It is currently the 10th greatest performing crypto asset since Jan 2021 as compared to the other cryptocurrencies presented above.

3. Technical Analysis on Polkadot

3.1. Volume Weighted Average Price (VWAP)

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VWAP is a technical indicator used by a trader to gauge the overall trend of an asset price movement. VWAP line (orange line) represents the volume-weighted average price (average price here is defined as the average of high, low and close prices) while close price line (blue line) represents the price when DOT is closed at the end of every single day. 

Whenever blue line (close price) is above orange line (VWAP), it indicates that the asset is gaining momentum and being traded higher than its average price level. This would represent a 'buy' opportunity for short-term momentum trader whom task is to trade following the trend while a longer term mean-revision trader might take it as a 'sell' opportunity, anticipating that the price of DOT (blue line) to fall to its average level (orange line).

Whenever blue line (close price) is below orange line (VWAP), it indicates that the asset is losing momentum and being traded lower than its average price level. This would represent a 'sell' opportunity for short-term momentum trader whom task is to trade following the trend while a longer term mean-revision trader might take it as a 'buy' opportunity, anticipating that the price of DOT (blue line) to rise to its average level (orange line).

As of 11 May 2021, VWAP is suggesting that DOT is trading below its average price range of USD 38 to USD 39 per DOT.

3.2. Moving Average Convergence Divergence (MACD)

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MACD is often used by trader as a momentum indicator. There are 2 lines that form the above charts, namely MACD (12, 26) lines and Signal(9) line, while the histogram is calculated by subtracting Signal (9) from MACD (12,26). Histogram would fall to the negative territory whenever MACD (12, 26) is trending at a lower level than Signal (9) and rise to the positive territory whenever MACD (12,26) is trending at a higher level than Signal (9).

MACD (12, 26) is computed by subtracting the 26-day exponential moving average (EMA) of DOT closing price from its 12-day EMA. 
Signal (9) on the other hand is calculated as the 9-day EMA of MACD (12,26). 

As MACD (12, 26) goes higher away from Signal (9), it signifies that DOT is gaining momentum and whenever it goes trends at a lower level than Signal (9),it signifies that DOT is losing momentum. 

As of 11 May 2021, MACD is suggesting that DOT is losing momentum.

3.3. Bollinger Band

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Bollinger band is often being used by mean-reversion trader as a gauge to assess how undervalued or overvalued an asset is. Its chart made up of 4 lines, namely:

- SMA (20) (blue line), which is the 20-day simple moving average price of DOT
- Upper Band (orange line), which is computed by adding 2 standard deviations of DOT on SMA (20)
- Lower Band (red line) , which is computed by subtracting 2 standard deviations of DOT from SMA (20)
- Close (green line), which is the daily closing price of DOT

Whenever close line (green) touches the lower band (red), it indicates that DOT is corrected too much and is being traded at an undervalued level, representing a 'buy' opportunity. On the other hand, whenever close line (green) touches the upper band (orange), it indicates that DOT is gaining too much momentum and is being traded at an overvalued level, thus indicating a 'sell' opportunity. 

As of 11 May 2021, Bollinger Band is suggesting that DOT is trading at its fair value (i.e. neither overbought nor oversold).

3.4. Relative Strength Index (RSI)

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Just like Bollinger Band, Relative Strength Index is often being used by mean-reversion trader as a gauge to assess how undervalued or overvalued an asset is. There are 2 psychological levels, i.e. 30 and 70 in RSI. Whenever the RSI reaches 30, it indicates that DOT is corrected too much and is being traded at an undervalued level, representing a 'buy' opportunity. On the other hand, whenever RSI reaches 70, it indicates that DOT is gaining too much momentum and is being traded at an overvalued level, thus indicating a 'sell' opportunity. 

As of 11 May 2021, RSI is suggesting that DOT is trading at its fair value (i.e. neither overbought nor oversold).

Based on the technical analysis presented above, quantdoge holds a bullish stance on the short-term price outlook of Polkadot and thinks that there is a fair chance for DOT to exceed USD 40 in the coming week, but I could be wrong, hence please make your careful due diligence before making any financial decision. 

4. Polkadot Risk Profile

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Based on the 100-day 95% historical Value-at-Risk (VaR) profile of Polkadot defined above, DOT seems to trade at a lower risk level on 11 May 2021 as compared to 10 days before on 01 May 2021, with its biggest pullback being seen at - 12.42% on a single day during the last 100 days. However, I could be wrong, hence please make your careful due diligence before making any financial decision.

5. Price Simulation for Polkadot

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How did quantdoge simulation perform vs the actual DOT price movement over the last week ?

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Over the last 7 days, DOT has been trading at the expected price range of quantdoge simulations, indicating that DOT was trading near its fair value level over the last week. 

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If you are into VeChain (VET) and ChainLink (LINK), I have made similar analysis on them at:

If you like my analysis and articles, please follow me at @quantdoge for daily updates. 

 

 

 

 

 

 

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quantdoge
quantdoge

Data scientist in crypto and blockchain space.


Daily Crypto Risk Report
Daily Crypto Risk Report

This blog was created by quantdoge, a data scientist in the cryptocurrency and blockchain space to publish daily risk reports on different cryptocurrencies. All published reports in this blog were analyzed with in-house algorithmic trading and quantitative risk management technology. ** Investment disclaimer: ** I am not a registered investment, legal, or tax adviser or a broker/dealer, and all opinions expressed by me are from my research for educational purposes only.

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