Dogecoin (DOGE) saw a significant drop as it broke below a 120-day horizontal support area, reaching a low of $0.057 on October 9. The coin remains confined within a broader descending triangle pattern, with the weekly and daily Relative Strength Index (RSI) indicators signaling bearish conditions.
Despite this bearish outlook, it’s essential to keep an eye on the possibility of a rebound at the well-established horizontal support level of $0.057, which could spark an upward price movement for DOGE.
Dogecoin Breaks Below 120-Day Support Zone
On the daily timeframe, the technical analysis indicates that DOGE has been trading above the $0.060 horizontal support zone since June 10. Concurrently, it has been following a descending resistance trendline since July 25. These combined factors have formed a descending triangle pattern, typically viewed as a bearish signal.
On October 9, Dogecoin’s volatility returned, breaking below the support area and pushing the price down to $0.057. This marks the lowest price level observed since August 17, when the altcoin had dropped to $0.055. While a slight bounce was observed with a long lower wick, the price has yet to reclaim the $0.060 area.
The daily Relative Strength Index (RSI) currently presents a bearish signal. When the RSI reading surpasses 50, and there’s an upward trend, it suggests a favorable position for bulls. Conversely, the opposite scenario is indicated when the reading falls below 50.
Currently, the RSI indicator is below 50 and trending downwards, both indicative of a bearish trend. Furthermore, the indicator has broken below its bullish divergence trendline (represented by the green line), further reinforcing the bearish sentiment.
DOGE Price After Breakdown: What Comes Next?
The weekly timeframe presents a bearish outlook for several reasons. Firstly, the DOGE price is entrenched within a larger descending triangle pattern, with a base at $0.057. As mentioned previously, this pattern is typically considered bearish.
In the event of a breakdown that encompasses the entire height of the triangle (illustrated by the black line), DOGE could potentially descend to $0.020. This would entail a substantial decline of 67% from its current price. The 1.27 Fibonacci extension (marked in white) further reinforces this area as a potential local bottom, aligning with the $0.020 level.
According to the Fibonacci retracement theory, following a significant price movement in one direction, there is an expectation that the price may partially retrace to a prior level before continuing in the same direction. This concept can also identify potential bottoms in future downward movements.
Much like the daily timeframe, the weekly RSI exhibits a bearish trend, with its reading falling below 50.
Notwithstanding the bearish outlook for DOGE’s price, a robust rebound at the well-established long-term horizontal support level of $0.057 could pave the way for a 20% upswing toward the long-term descending resistance trendline, presently at $0.070.