Dogecoin (DOGE) is poised for a significant price bounce after achieving a technical support confluence on May 12.
DOGE’s 45% price decrease to $0.065(R 1.05) this week, or a 90% plunge from its year-ago high of $0.76(R12.24), was met with positive purchasing sentiment. As a result, the token had a slight price comeback on May 12, gaining more than 10% to $0.078(R1.26).
Interestingly, Dogecoin’s uptrend began around the intersection of two support levels: a multi-month downward sloping trendline and a horizontal line that preceded a 335 % price surge in the week of April 19 last year.
In the meantime, the falling trendline is a component of a broader descending channel pattern. Its frequent retests as support in the last 12 months boosted DOGE’s price toward the upper trendline of the channel. If the pattern holds, Dogecoin’s recovery will extend to the upper trendline near $0.10(R1.61), representing a nearly 25% increase from the price on May 12.
The uptrend also takes cues from Dogecoin’s daily relative strength index (RSI), which is currently nearing its oversold threshold of 30 – a buy signal.
A forceful move below the confluence support, on the other hand, risks sending DOGE to $0.04(R12.24), which functioned as a key support level in the February–April 2021 session. That would imply another 40% drop in price before the next possible bounce.
The latest bout of selling in the Dogecoin market corresponds with similar sentiment in the entire crypto and traditional markets, driven by the Federal Reserve’s plan to aggressively tighten monetary policy in order to combat increasing inflation.
Dogecoin, like its key rivals Bitcoin (BTC) and Ether (ETH), has been impacted by the panic caused by the depegging of two popular stablecoins: TerraUSD (UST) and Tether (USDT) (USDT). As DOGE remains above its technical support levels, Tesla CEO Elon Musk is the next probable bull case.
The billionaire investor, who has emerged as one of the most prominent Dogecoin supporters, recently bought Twitter for $44 billion(R714B). Prior to the acquisition, he proposed to the Twitter board that DOGE be accepted as payment for their first-ever subscription service, Twitter Blue.