For the first time since June 22, the price of Dogecoin is approaching the 200-day simple moving average (SMA).
DOGE’s head-and-shoulders neckline is currently trading at $0.160, just below the 200-day SMA.
On the daily Relative Strength Index, the Meme token is approaching another oversold reading (RSI).
The May 19 low and the falling trend line are pulling down on Dogecoin’s price, as the 200-day SMA tries to hold off the unrelenting selling pressure that has been building since June 29. DOGE will break below the strategically important moving average and trigger the neckline of the head-and-shoulders pattern as long as the trend line remains unbreakable.
Since June 29, Dogecoin’s price strength has been hampered by a descending trend line, as evidenced by DOGE’s failure to log a single daily close above the trend line. As a result, the right shoulder of a complex head-and-shoulders pattern that began in April has been completed.
The head-and-shoulders formation has a measured move of 82 percent, implying a Dogecoin price target of $0.028. To put things in perspective, a drop of that magnitude would obliterate the 200-day SMA, the June 22 low of $0.152, the April 23 low of $0.135, the 50-week SMA at $0.105, and the January 29 high of $0.100 as support.
Even in the context of a shaky cryptocurrency market, an 82 percent drop from the neckline at $0.160 seems extreme. A test of the January 29 high of $0.100 would be a more feasible goal for Dogecoin pricing, representing a 37 percent move from the current neckline level and a 46 percent advance from the current price.
There is one flaw in the unusually pessimistic forecast. The daily RSI is already approaching an oversold reading, and the last time it reached that level was on June 22. Furthermore, the indicator has only dropped below 30 once since the beginning of 2019, and that was in March 2020.
Graph of the DOGE/USD pair on a daily basis
If Dogecoin price can finish above $0.210 on a daily basis, it will be the first sign that the sluggish decline below May’s descending trend line has ended, allowing DOGE to test the resistance outlined by the junction of the 50-day SMA at $0.280 and the $0.281 high set on June 29. A rise from the $0.210 trigger to the 50-day SMA would result in a 30% gain for investors.
The price of Dogecoin has reached an inflection point as a result of the growing downside momentum and the crossing of support and resistance levels. The outcome will almost certainly have long-term implications for the DOGE tale.
FXStreet’s analysts assess where DOGE might be headed next./n
