After the recent cryptocurrency market crash, the price of Dogecoin (DOGE) stagnated daily. This quickly led to a drop in volatility, which today records levels from October 2022 to May 2023.
The upcoming move could lead to an upward move of 170% or a drop of another 34%. A hidden bullish divergence could increase the chances of the former scenario. However, for this, it will be necessary for the Dogecoin price to break out of the long-term descending triangle successfully.
Dogecoin Price in a Long-Term Descending Triangle
The weekly chart of Dogecoin provides mixed signals that are characteristic of a long-term accumulation period. Since January 2022, i.e., for 84 weeks already, the DOGE price has been in a relatively narrow trading channel between the bottom at $0.055 and the peak at $0.160.
Moreover, Dogecoin is moving in a descending triangle formation (blue lines), outside of which the price has not closed since April 2022, or 16 months. Despite several deviations above (blue areas), the formation holds.
Moreover, the volume, which has been declining regularly since October 2022 (orange line), confirms its validity.
The descending triangle is most often a bearish formation of the continuation of the downtrend. However – especially on the high interval – it often ends in a long-term decline. If this was the case here, the breakout from this formation, which should occur in the next few weeks, could be confirmation of a bullish trend reversal.
The relative strength index (RSI) also provides mixed signals. With the RSI as a momentum indicator, investors can determine whether the market is overbought or oversold. In addition, they decide whether to accumulate or sell assets.
Bulls have an advantage if the RSI reading is above 50 and the trend is upward. However, if the reading is below 50, the opposite is true. Currently, the weekly RSI for Dogecoin is at 41 and dropping. This suggests a continuation of the bearish trend.
However, a bullish signal is that despite the declines, the weekly RSI is holding the ascending support line (blue), which has been in place since January 2022. If the indicator does not break below 40, an upward bounce is possible in the coming weeks.
DOGE Price Prediction: A 170% Increase or Another 34% Decrease?
The daily chart of the DOGE price also provides mixed signals. However, several bullish arguments can be seen in this time frame. First of all, recent declines in the cryptocurrency market have not generated a lower low, measured at closing prices. This means that Dogecoin effectively holds the $0.060 level as support.
Moreover, the sharp decline in mid-August brought the daily RSI to the overbought area. As a result, a small hidden bullish divergence (blue lines) appeared on the chart.
This formation appears when the price of an asset does not fall below the previous low, but the RSI records lower values. A short-term upside can be expected if the hidden divergence plays out correctly.
Finally, the daily chart of Dogecoin is seeing extremely low levels of volatility. This is evidenced by the Bollinger Band Width Percentile (BBWP) indicator, which reached a minimum blue level today.
Although this indicator says nothing about future movement direction, it suggests a major price change is imminent.
The last two times the BBWP reached the extremely low volatility level, there was a big move in the DOGE price on consecutive days. The first time it happened was in October 2022. The Dogecoin price surged 170% and reached the top of its long-term range just below $0.160.
In contrast, the second time the minimum volatility occurred was in May 2023. After this event, the DOGE price dropped 34% to a low of $0.053.
A hidden bullish divergence could lead to the nearest resistance level at $0.082 and an attempt to break out of the long-term descending triangle. On the other hand, if increased volatility leads to a continuation of declines, the long-term area at $0.048 is likely to serve as support.
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Disclaimer
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