A recent price rally in the market of Polygon's native MATIC token pushed its prices above $ane.56 for the first time in more than two months.

The MATIC/USDT exchange rate rose xx.65% in simply two days to reclaim its June 17 high. Traders raised their bids for the pair later on Polygon announced that it would create a decentralized autonomous arrangement (DAO) for its community members while focusing specifically on the booming decentralized finance (DeFi) space.

Polygon, which offers layer-two scaling solutions for Ethereum projects, allocated $100 million for the DAO creation — and also to bring DeFi projects into its interoperability pool. The team likewise announced that information technology would airdrop new DAO governance tokens to existing Polygon users — i.e., costless tokens for people who hold MATIC.

The solid interim fundamentals have pushed MATIC demand higher amidst speculators, leading to a cost rally over the by 2 days. Meanwhile, the upside motility also activated a classic bullish setup that could send MATIC prices to a new tape high.

Breakout awaited

Dubbed "inverse caput and shoulders," the pattern is a common bullish reversal indicator that appears after the price makes three troughs in a row below a resistance-like neckline. In doing so, the middle trough (caput) appears to be deeper than the other two (shoulders), which are more or less of equal height when measured from the neckline.

Technical chartists typically enter a long position when the price moves above the neckline, with the pattern'due south maximum summit plus the breakout level serving as their ultimate profit target. Their stop loss is usually at the depression point of the right shoulder.

Applying the textbook definitions on the MATIC/USDT three-day chart shows the pair forming an inverse head and shoulders pattern.

Polygon (MATIC/USDT) three-day nautical chart with the inverse head and shoulders setup. Source: TradingView

On Aug. xx, Polygon's token inched to a higher place the neckline resistance of $1.51 following a 150% price rally measured from the June eighteen low of $0.62 (the head). Therefore, the maximum height of the inverse head and shoulders pattern came out to be $0.89.

Related: Terra Virtua moves to Polygon blockchain, citing environmental concerns

Every bit a result, should the MATIC/USDT rate break higher up $ane.51, accompanied by a spike in trading volume, the pair volition increment its likelihood of ascension $0.89. In doing so, it would eye $2.xl every bit its changed head and shoulders profit target, just $0.30 below its current record high.

Bearish setup

If MATIC bulls fail to repossess $1.51 equally support, its toll could retreat back to the side by side line of back up nearly $one.35.

MATIC/USDT 3-solar day candle chart. Source: TradingView

An boosted breakup would expose MATIC/USDT to $one.09, a reliable back up level in recent history.

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