Dogecoin volatility explained: key chart patterns to watch
Dogecoin, the famous meme coin, has recently mirrored Bitcoin’s volatility, drawing significant market interest. From July 1 to July 5, DOGE saw a sharp drop of 16%, falling from $0.1252 to $0.1055.
It has since recovered slightly, now trading at $0.1112, marking a 6.31% gain today. Nonetheless, DOGE is still a significant 85% below its record high of $0.7376, set on May 8, 2021.
Technical analysis and market trends
An in-depth technical analysis offers critical insights into Dogecoin’s current market status. Noted analyst Blue Crypto underscores the significance of the $0.107 support level, essential for maintaining a bullish outlook.
Blue Crypto points out that if DOGE manages to climb above $0.1086 and establishes it as new support, it could foreshadow an upward movement, targeting $0.1142 next. This resistance level is vital for signaling a continuation of a bullish trend.
On the flip side, failing to hold the $0.10745 support could lead to further downside risks. Blue Crypto cautions that this scenario would likely increase market volatility and selling pressure, shifting sentiment to a bearish outlook. This caution is supported by other technical indicators on the daily chart that show a notable bearish trend.
Momentum indicators and market sentiment
The 50-day and 100-day Exponential Moving Averages (EMA) are currently above the price, indicating an ongoing downtrend and selling pressure. The 50 EMA being below the 100 EMA highlights the current market weakness and lack of bullish momentum.
Additionally, the Relative Strength Index (RSI) is around 39.30, which is below the neutral 50 and approaching oversold territory. An RSI at this level suggests prolonged bearishness, although it also indicates a potential rebound if selling pressure reduces and buyers re-enter.
The Awesome Oscillator (AO) and the Moving Average Convergence Divergence (MACD) indicators also show persistent bearish momentum. The MACD line remaining below the signal line indicates continued bearish pressure
However, the narrowing gap between the MACD and signal line, along with smaller red histogram bars, suggests a possible convergence that could lead to a bullish crossover.
Dogecoin’s historical context and market dynamics
Created in 2013 as a humorous take on cryptocurrencies, Dogecoin features the popular Shiba Inu meme. Unlike Bitcoin, Dogecoin was designed to be abundant, with no cap on its supply and 10,000 new coins being mined every minute. Initially dismissed as a “memecoin,” Dogecoin’s stature changed dramatically in 2021.
https://x.com/Jim_dogebuilder/status/1809299151764468088
Despite each coin being worth just a few cents, Dogecoin joined the ranks of the top ten most valuable cryptocurrencies by market cap, peaking at over $50 billion.
The value of Dogecoin is driven by market demand and its considerable, growing supply. In early 2021, DOGE prices skyrocketed by roughly 7,000%, thanks to retail investors from Reddit, broader crypto enthusiasm, and tweets from Tesla CEO Elon Musk.
This price surge attracted significant media and social media attention, creating a loop that brought in more new investors, pushing prices even higher. Nevertheless, Dogecoin remains highly volatile, with its future value being highly unpredictable.
Current chart patterns and trading strategies
Recently, Dogecoin’s price movement has shown consolidation within a Falling Wedge pattern, typically indicating a bullish breakout and trend reversal. Traders are advised to wait for a breakout above the upper trend line to confirm a bullish trend.
Swing traders might trade between the convergence lines before the breakout, but most should wait for a confirmed pattern before placing buy orders.
The short-term, medium-term, and long-term trends for Dogecoin are currently bearish. While momentum indicators like the MACD histogram show signs of a bullish inflection, the overall trend is still bearish. The immediate support levels are $0.10 and $0.075, with resistance levels at $0.126 and $0.17.
