Dogecoin has begun consolidating along the 50-day SMA and above the midline of the descending channel since May 20. Over the last few days, the relative strength shown by DOGE price is a noteworthy divergence considering that it was created as a joke meme and has no utility. In times of market dislocation, it is imperative to seek out a relative strength index, and the meme-token is becoming one of those leaders.
Dogecoin price declined about 75% from the May 8 high at a price of $0.760 to the May 19 low at $0.195, putting it on the higher side of the range for declines from peak to low. However, the digital token did achieve a 70% price rally off the May 19 low, closing Dogecoin back above the 50-day SMA where it has traded over the last six days, excluding the brief drop on May 23.
The significant price decline and ensuing consolidation have released the overbought condition on the weekly Relative Strength Index and nudged the daily RSI to the lowest reading since October 2020. Moreover, the daily trade volume on down days has not surpassed the 50-day SMA since May 10. In fact, excluding the May 19 crash, daily trade volume on down days has been around 25% of the 50-day average, reflecting no rush for the exits by investors.
Today, the Dogecoin price tagged the channel’s upper trend line level before reversing with the overall cryptocurrency market. It is a normal reaction to a resistance support level that has held since early May, particularly in a market experiencing wide gyrations.
A daily close above the channel’s upper trend line level will be the preliminary indication that the consolidation is complete and the Dogecoin price is ready to retrace the decline. If the breakout gains traction, the DOGE price will be met with resistance at the 50% retracement level of the May correction at a price of $0.477, which coincides very closely with the April 16 high at $0.470 and the May 19 high at $0.492. A successful close above the price of $0.492 would yield a high probability entry spot.
It will require a considerable thrust to break out the resistance mentioned earlier before Dogecoin engages the 61.8% Fibonacci retracement at a price of $0.544. More resistance will follow at the May 14 high at $0.604 before a clear path emerges to the topside trend line level beginning January 29, currently at $1.034.
The transparent support level for DOGE begins at the channel’s midline at $0.285, followed by a price range of $0.250-$0.228, created by the shadows of several candlesticks patterns in April and May 23 low at $0.246.
An acceleration of selling pressure will lead DOGE price to the channel’s lower trend line, currently at $0.207 and likely a test of the May 19 low at a price of $0.195.
For interest’s sake, the wide swings in May have set Dogecoin's price up for a monthly Doji candlestick pattern, reflecting a balance between supply and demand.
The new IntoTheBlock In/Out of the Money Around Price data shows a sizeable number of out-of-the-money addresses around the 50-day SMA at a price of $0.342. One cluster is of 29.83k addresses owning 3.23 billion Dogecoin at an average price of $0.347. The second cluster comprises 75.4k addresses holding 3.92 billion Dogecoin at an average price of $0.361. A push above these two clusters frees Dogecoin's price to rally unimpeded to $0.400.
On the in-the-money side, there are two important clusters of support level, also around the 50-day SMA. One cluster is formed by 29.51k addresses holding 4.55 billion in Dogecoin at an average price of $0.333, and the second comprises 76.19k addresses holding 3.44 billion Dogecoin at an average price of $0.320.
The IOMAP explains the recent DOGE price action and suggests the standoff will continue in the short term.
DOGE price is locked in a tight range, surrounded by essential support level and resistance. Still, technicals are tilted towards a DOGE bullish resolution of the consolidation and a renewed effort to retrace the meaningful decline in May.
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