Dogecoin (DOGE) Under Threat: How FTX's Sell-Off Will Affect Long-Term Support
Date: 2023-09-13 Author: Karina Ziganova Categories: BLOCKCHAIN
DOGE is at risk of making a bearish breakout from a long-term descending triangle pattern. This could trigger a price reduction of 50%.
While the weekly timeframe signals are decidedly bearish, the daily chart provides hope for a potential bullish trend reversal for Dogecoin (DOGE).
DOGE may fall out of long-term pattern
The Dogecoin project token is one of the most recognizable “calling cards” of the crypto market and has many fans. It appeared in 2013 as a meme coin, but many already believe that DOGE has outgrown this status.
As the results of technical analysis of the weekly chart show, DOGE has been slightly above the $0.059 support level since June 2022. This support has been tested for strength many times, which increases its significance. It is noteworthy that the latest such tests, marked with green icons, were characterized by long lower wicks, which indicates increased purchasing activity.
Despite this clear bullish trend, DOGE has also been constrained by a downtrend resistance line since November 2022. When combined with the $0.059 support level, it forms a descending triangle pattern, which is generally considered a bearish pattern. During this period, DOGE formed several lower highs, indicating a loss of upward momentum. Moreover, the price has almost returned to the $0.059 horizontal area, wiping out the points gained during the last bounce.
A bearish breakout to the full height of the pattern (white) could lead to a decline in DOGE to the $0.030 level. To confirm such a breakout, the coin must close below the horizontal support level at $0.059.
The weekly relative strength index (RSI) confirms the possibility of a bearish breakout. It is below 50 (red circle) and declining, indicating a bearish trend.
Let us also recall that now the notorious bankrupt crypto exchange FTX is trying to obtain court permission to liquidate assets worth about $3.4 billion. Many members of the crypto community fear that this could become a catalyst for a large-scale collapse of many cryptocurrencies. This is particularly the case for DOGE, as it reported holding $42 million in Dogecoin holdings.
DOGE forecast: will a double bottom save the bulls
Unlike the weekly timeframe, the daily chart gives hope for a bullish trend reversal. The main reason for this is the formation of a double bottom. In this case, the first bottom had a long lower wick (green icon), and the second bottom was combined with a bullish divergence in the RSI (green line). Finally, the pattern is inside a horizontal support area.
All these signs indicate the possibility of an upward movement.
However, since these bullish signs are only present on the daily timeframe, it is possible that they will only trigger a short-term bullish reversal. The price can only rise to the long-term resistance line at $0.070, after which a new downward movement will begin.
Additionally, a close below the $0.061 area will invalidate the double bottom pattern, likely leading to the aforementioned bearish breakout on the longer-term chart.
Moreover, the outlook for DOGE will be bearish if it closes below $0.059. In this case, the price is expected to decline by 50% towards the next support at $0.030.
