After the recent collapse of the crypto market, Dogecoin (DOGE) quickly lost its volatility, which today has decreased to the levels of the period from October 2022 to May 2023.
The upcoming move could see Dogecoin rise by 170% or fall another 34%. Hidden bullish divergence potentially increases the chances of the first scenario. However, this requires the DOGE price to make a successful bullish breakout from a long-term descending triangle.
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Dogecoin in a long term descending triangle
The Dogecoin project token, one of the most recognizable “calling cards” of the crypto market, has many fans. It appeared in 2013 as a meme coin, but many already believe that DOGE has outgrown this status.
As the results of the technical analysis of the weekly chart show, the picture for DOGE looks ambiguous, giving signals about a period of long-term accumulation. Since January 2022, i.e. 84 weeks already, the price has been moving in a relatively narrow trading channel between a low at $0.055 and a peak at $0.160.
In addition, Dogecoin is in a descending triangle pattern (blue lines), beyond which the price has not closed since April 2022, or 16 months. Despite several bullish price rejections (blue zones), this formation remains in place.
Meanwhile, trading volumes have been steadily declining since October 2022 (orange line).
The descending triangle is most often a bearish downtrend continuation pattern. It often ends in a long-term decline, especially on long timeframes. If this is the case in this case, then a bullish break out of this formation in the next few weeks could be confirmation of a bullish trend reversal.
Source: TradingView
The weekly Relative Strength Index (RSI) is also giving mixed signals. This momentum indicator is currently at 41 and declining. This indicates a continuation of the bearish trend.
However, the bullish signal is that despite the decline, the weekly RSI is holding above the ascending support line (light blue) that has been on the chart since January 2022. If the indicator does not break below 40, then a bounce up is possible in the coming weeks.
Also Read: How Much Dogecoin (DOGE) Should You Invest To Become A Millionaire In The Next Bull Market
DOGE Forecast: 170% up or another 34% down
The daily DOGE chart is also giving mixed signals. However, several bullish arguments can be seen in this time frame. First, recent market declines have not resulted in a lower low. This means that the coin is successfully holding the $0.060 level as support.
In addition, after a sharp drop in mid-August, the daily RSI began to give weak signals of a small hidden bullish divergence (blue lines).
This formation occurs when the price of an asset does not fall below the previous low, but the RSI fixes lower readings. Such hidden divergence may be a harbinger of short-term growth.
Source: TradingView
Finally, Dogecoin sees an extremely low level on the daily chart volatility. This is evidenced by the Bollinger Band Width indicator. Bollinger Band Width Percentile (BBWP), which hit a blue low today.
Although this indicator does not say anything about the direction of the future movement, it indicates a major price change is coming.
The last two times the BBWP hit extremely low volatility levels, there was strong price movement in the following days. The first time this happened was in October 2022. The price of DOGE jumped 170% and reached the upper end of its long-term range just below $0.160.
The second time the minimum volatility was observed in May 2023. After that, DOGE dropped 34% to a low of $0.053.
Hidden bullish divergence could take Dogecoin to the nearest resistance at $0.082 and attempt a bullish breakout from a long-term descending triangle. On the other hand, if increased volatility leads to a continuation of the decline, then the long-term $0.048 area is likely to act as support.
Read also: Bitcoin is getting cheaper in September. What does this mean for traders
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2023-08-29 16:25:33
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