- Dogecoin price closed last week at the lowest level since April, suggesting the jump off the lows is temporary.
- May trend line continues to block the June 22 rally from initiating a second stage.
- Correlation with Bitcoin is high, implying the uncertainty associated with the flagship cryptocurrency will overshadow DOGE.
Dogecoin price staged a notable 90% rebound from June 22 to June 25. It was a welcome change from the weakness that defined price through much of May and June. However, since June 25, DOGE has not translated the initial bounce into a sustainable rally, reaching the 50-day simple moving average (SMA) or higher. In reality, the meme token broke below the lower trend line of the minor symmetrical triangle pattern plotted since June 25.
Dogecoin price may recover, but three factors combine to raise doubts about the outlook for DOGE, including the overwhelming resistance of the May trend line, the lower closes on the weekly chart and the high correlation with the indecisive Bitcoin.
Dogecoin price failure at key level dyes the market red
A valuable tool to evaluate whether a trend remains active is using trend lines through key highs or lows of the prominent trend. In the case of Dogecoin price, the May trend line beginning at the May 8 high and running through the June highs has become stiff resistance for DOGE.
On June 25, the rebound from the tactically important 200-day SMA at $0.150 was impeded by the declining trend line, and Dogecoin price soon reversed the gains to close down 10% on the day. Furthermore, over the last eight trading days, DOGE has tagged the May trend line or reversed gains to close on or below, fortifying the technical presence of the downtrend initiated on May 8.
Taking into account the fruitless attempts to overcome the trend line’s resistance, investors face a cautionary environment. It raises the probability that Dogecoin price may revisit the June 22 low at $0.152 moving forward unless a significant catalyst transforms the current price structure.
DOGE/USD daily chart
Dogecoin price not secure, as digital token registers a lower close
The weekly chart is fundamental to gauging whether a trend has been exhausted for many prominent investors and institutions. Critical to the analysis is where the weekly close is relative to the surrounding price structure.
The weekly close smoothes out the day-to-day vibrations and gives a better reading on the sentiment of bigger investors. In the case of Dogecoin price, the digital asset closed last week at $0.246, marking the lowest weekly close since the downtrend began and the lowest level since mid-April, suggesting that DOGE investors remain noncommittal and have used the recent bounce from June 22 to June 25 to lighten positions.
This week Dogecoin price is building on last week’s bearish close, increasing the pressure on any preexisting bullish narrative and delivering another cautionary signal to DOGE investors.
DOGE/USD weekly chart
Dogecoin price relationship with Bitcoin playing critical role
A final headwind challenging Dogecoin price is the tight correlation with Bitcoin as the Correlation Coefficient is running at .80 with the pioneer cryptocurrency. The close correlation indicates that DOGE is now greatly influenced by Bitcoin price action, which has been directionless since May 19.
With a neutral to negative price structure for Bitcoin and the tight correlation, it is challenging to contend that Dogecoin price will decouple in the short term, presenting the potential for further DOGE weakness.
Of course, it has been frequently shown on different timeframes that social media can profoundly impact Dogecoin price, and it cannot be ruled out. Nevertheless, with all things being equal, the lackluster Bitcoin price action will be a headwind.
DOGE/USD daily chart
Few cryptocurrencies have been as entertaining and profitable as DOGE in 2021. Still, like all digital assets, it is also governed by technical realities and influenced to some extent by the price authority of Bitcoin. As a result, Dogecoin price aspirations of turning the June 22-25 rebound into a sustainable rally narrative are being questioned by the three realities illuminated above.
The potential outcome of the situation is a decline to the June 22 low of $0.152, representing a 35% decline from the current price. The drop would best the support offered by the May 19 low of $0.195 and the 200-day SMA at $0.168, and reset the outlook for Dogecoin price for the foreseeable future.
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended Content
Editors’ Picks
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days. Investors can expect XRP to kickstart a massive rally.
Optimism price outlook with nearly $90 million worth of OP tokens flooding markets on Friday
Optimism volatility has shrunk in the ours leading to the network’s cliff unlock. It joins the likes of dYdX and Sui, which have similar events on their calendars. As token unlocks are often considered bearish catalysts, investors should brace for a reaction after the event.
Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Retail watches from the sidelines with a bias for shorts
Bitcoin could clear $73,777 peak as BTC bulls resurface. Ethereum might fall 10% before next leg up as ETH RSI teases with sell signal. XRP could lose $0.6000 threshold as Ripple bulls fail to show up.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito price action shows a potential cup and handle formation. Based on theoretical measurement rules, a successful breakout could yield a 56% rally to $6.0. A breakdown of the $3.86 support level would create a lower low for JTO and invalidate the bullish thesis.
Bitcoin: BTC may have recovered, but is it out of the woods?
Bitcoin’s (BTC) upward momentum has shown a significant decline for the past two weeks or so. This development led to a bearish signal on the weekly and an uncertain outlook on the monthly.