A brutal correction witnessed in the Dogecoin (DOGE) market between May 2021 and February 2022, which saw the price dropping by almost 85%, appears to have come to a halt this month.
DOGE/USD rebounds 30% in two weeks
DOGE experienced strong dip-buying when its price crashed to levels around $0.10 two weeks ago, resulting in a 30% rebound move to $0.14 as of March 27. Meanwhile, the coin's upside retracement originated at a support level that constitutes a "falling wedge" setup, signaling an extended bullish reversal in the weekly sessions ahead.
In detail, a falling wedge pattern occurs when the price trends lower while fluctuating between two downward sloping, converging trendlines. In a perfect scenario, the setup results into the price breaking out of the descending range to the upside, rising by as much as the maximum distance between wedge's upper and lower trendlines.
DOGE/USD weekly price chart featuring 'falling wedge' pattern. Source: TradingViewDOGE's rebound from the wedge's lower trendline two weeks ago opens up its possibilities to continue the move upside toward the upper trendline — near $0.18. As such, breaking above the upper trendline further exposes Dogecoin's price rise toward $0.37, up more than 150% from today's price.
DOGE risks
Veteran investor Tom Bulkowski sees a falling wedge as a "poor performer" when it comes to predicting bullish chart patterns, noting that their "breakeven failure is high and the average price is low." He cites a study of 800 trades that shows that the possibility of a falling wedge breakout meeting its bullish target is near 62%.
Additionally, Dogecoin's track of record of showing a period of highly positive correlation with Bitcoin (BTC) — at 0.94 against the perfect score of 1 as of March 27 — could also limit its bullish bias if the latter drops due to ongoing macroeconomic and geopolitical pressures.
The correlation coefficient between DOGE/USD and BTC/USD. Source: TradingViewRelated: Bitcoin sellers keep BTC price action in check amid $45K 'fakeout' warning
Mice McGlone, the senior commodity strategist at Bloomberg Intelligence, noted that Bitcoin could drop to as low as $30,000 due to its strong correlation with the U.S. stock market. Nonetheless, he maintained that BTC's price should recover from its bearish slump to target $100,000 in the long term.
DOGE price levels to watch out next
Dogecoin's latest rebound move now eyes a quick run-up towards the $0.15-0.19 area, a range encapsulating three psychological resistance levels: the 20-day exponential moving average (20-day EMA; the green wave), the 50-day EMA (the red wave), and the 0.618 Fib line (near $0.19) of the Fibonacci retracement graph — all shown in the chart below.
DOGE/USD daily price chart. Source: TradingViewA strong pullback, accompanied by a rise in volume, from the said resistance area could have DOGE test the 0.786 Fib line near $0.10 as its interim downside target. Conversely, a decisive move above the range could result in an extended upside momentum towards $0.24, with an eye on $0.30 and $0.37 (also the falling wedge target).
Conversely, a decisive move above the range could result in an extended upside momentum toward $0.24, with an eye on $0.30 and $0.37 (also the falling wedge target).
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
