Dogecoin eyes ‘oversold’ bounce as DOGE price gives up 90% of yearly gains

Dogecoin eyes 'oversold' bounce as DOGE price gives up 90% of yearly gains

Dogecoin (DOGE) is showing promise for a strong price rally after reaching a confluence of technical support on May 12.

25% rebound in DOGE price?

DOGE’s shares fell 45% this week to $0.065, or 90% from a record high of $0.76 a year ago, in good buying sentiment. As a result, the coin experienced a modest price rally on May 12, rising more than 10% to $0.078.

Interestingly, Dogecoin’s upside retracement movement began near the intersection of two support levels: a more than a month old downward sloping trendline and a horizontal line that saw price rise in the week ending April 19 last year 335% before.

DOGE/USD weekly price chart. Source: TradingView

Meanwhile, the downtrend line is part of a broader descending channel pattern. Its multiple retests as support over the past 12 months have pushed DOGE’s price towards the channel’s uptrend line. If the pattern repeats, Dogecoin’s rally would extend upward to a trendline near $0.10, a nearly 25% gain from its May 12 price.

DOGE/USD weekly price chart with “Descending Channel” setup. Source: TradingView

The upside setup is also taking cues from Dogecoin’s daily Relative Strength Index (RSI), which is now near its oversold threshold of 30 – a buy signal.

Conversely, a break below the confluence support could push DOGE to $0.04, which has been a strong support during the February-April 2021 trading session. This implies another 40% drop in price before the next potential rally.

Elon Musk and the Fed

The latest round of sell-offs in the Dogecoin market coincides with similar sentiment across the cryptocurrency market and traditional markets, largely due to the Federal Reserve’s decision to aggressively tighten monetary policy to curb rising inflation.

Dogecoin, like its top competitors Bitcoin (BTC) and Ether (ETH), has also been subject to panic surrounding the decoupling of two popular stablecoins: TerraUSD (UST) and Tether (USDT).

As DOGE remains above its technical support level, its next potential bull case is none other than Tesla CEO Elon Musk.

The billionaire investor has become one of the most prominent Dogecoin backers, having recently acquired Twitter for $44 billion. Before the acquisition, he had advised Twitter’s board of directors to start accepting DOGE as payment for its first subscription service, Twitter Blue.

Twitter has not disclosed any plans to use DOGE for payments. But the prospect of it happening could put a price floor under the coin in the coming weeks.

The views and opinions expressed here are those of the author and do not necessarily reflect the views of Every investment and trading move involves risk and you should do your own research when making a decision.

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