The daily timeframe does not confirm the beginning of a bullish trend reversal, as the DOGE price is trading in a corrective pattern.
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Dogecoin is consolidating above long-term resistance
The Dogecoin Dogecoin project is one of the most recognizable “calling cards” of the crypto market and has many fans. Although it emerged in 2013 as a meme coin, many already believe that DOGE has outgrown its status as a mere meme.
According to technical analysis of the weekly chart, the price of DOGE has been declining along a descending resistance line since May 2021, when it reached an all-time high of $0.739. This decline led to the formation of the June 2022 low at $0.049 (green icon).
Another decline in the June 2022 low is expected.
After that, DOGE experienced a recovery phase and started trading above the $0.060 horizontal support level. After several unsuccessful attempts during half a year, on July 15 the price finally broke through the resistance line, which had been on the chart for an impressive 805 days. The DOGE/BTC pair has seen similar movement.
Some have speculated that this rise could be related to the recent rebranding of Twitter by Elon Musk.
Breaks of such long-term patterns often lead to significant price gains as they signal the end of the previous trend. However, it is important to note that the expected growth has not yet occurred.
Source: TradingView
The weekly Relative Strength Index (RSI) readings do not allow us to draw definite conclusions. This momentum indicator has been trading right around the 50 mark (green circle) for the past two weeks, reflecting a lack of clear directionality.
A vigorous bounce from this line would confirm a bullish trend reversal, while a decisive decline below it would indicate that the DOGE’s bullish breakout has failed.
A strong bounce from this line would confirm a bullish trend reversal, while a decisive decline below it would indicate that the DOGE’s bullish breakout has failed.
DOGE Outlook: Will the bullish trend reversal be confirmed?
The technical analysis of the daily timeframe gives a mixed outlook. The main reason for this is the contradictory price dynamics this year.
On the one hand, on July 24, DOGE made a bullish breakout of the descending resistance line. Prior to the breakout, this line had been on the chart for 265 days. However, the price was unable to consolidate the upward movement. Instead, on August 4, the token returned to test this line as support (green icon).
This could be considered a normal post-breakout retest, but the move from the June lows took place inside an ascending parallel channel. Corrective movements usually occur in such patterns, which means that a bearish exit is the most likely scenario.
If that happens, the coin will fall below this line, which will invalidate the previous breakout. In this case, the most likely scenario going forward would be a sharp 25% drop in the token back to the June lows at $0.055.
A bullish breakout from the channel would mean that the token is still active and could trigger a sharp drop of 25% towards the June lows at $0.055.
On the other hand, a bullish breakout from the channel would mean that the long-term bullish breakout remains active and could trigger a 100% price rise to the November 2022 highs. in the neighborhood of $0.15.
The RSI index, meanwhile, is above the 50 mark but is not showing a bullish trend. Rather, it is just treading just above this line, indicating a neutral trend.
Similarly, it is just treading just above this line, indicating a neutral trend.
Source: TradingView
So while the long-term trend for DOGE is bullish, the short-term trend is still undefined.
A bearish breakout from the channel would mean that the trend remains bearish, while a breakout of the channel’s upper boundary would confirm a bullish reversal of the long-term trend and could lead to a 100% rise in price.