Bad Dog! Is Dogecoin Headed To 5 Cents? Here's Why Bulls Need To Step In
Dogecoin (CRYPTO: DOGE) spiked up 16% at one point during the 24-hour trading session that began on Thursday at 8 p.m. but by Friday afternoon, the crypto had retraced about 9% from its high-of-day.
The spike higher offered some relief to traders and investors holding the Shiba Inu-themed cryptocurrency, which plummeted about 47% between Monday and Thursday, to reach a low of 6.5 cents.
Dogecoin’s higher prices may be temporary, however, if the possible bear flag the crypto is settling into plays out and the long upper wick on Dogecoin’s daily candle may indicate the break down from the pattern could come as soon as Saturday.
The bear flag pattern is created with a steep drop lower forming the pole, which is then followed by a consolidation pattern that brings the stock higher between a channel with parallel lines or into a tightening triangle pattern.
- For bullish traders, the "trend is your friend" (until it's not) and the stock may continue to rise upwards within the following channel for a short period of time. Aggressive traders may decide to purchase the stock at the lower trendline and exit the trade at the higher trendline.
- Bearish traders will want to watch for a break down from the lower descending trendline of the flag formation, on high volume, for an entry. When a stock breaks down from a bear flag pattern, the measured move lower is equal to the length of the pole and should be added to the highest price within the flag.
A bear flag is negated when a stock closes a trading day above the upper trendline of the flag pattern or if the flag rises more than 50% up the length of the pole.
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The Dogecoin Chart: Dogecoin’s possible bear flag pattern was created between Monday and Friday, with the pole formed over the first three days and the flag forming since. If the bull flag is recognized, the measured move could bring the crypto down to about the 5-cent mark.
- Bullish traders will want to see Dogecoin regain support at $0.099 in order to negate the flag formation, although it would give these traders more confidence if the crypto was able to regain the eight-day exponential moving average as support.
- Bearish traders want to see the crypto close Friday’s 24-hour session below the $0.088 level, which will cause Dogecoin to print a shooting star candlestick. A shooting star candlestick is often found at the top of a trend and can indicate lower prices are on the horizon.
- Even if Dogecoin’s potential bear flag doesn’t play out, the crypto is trading in a confirmed downtrend and Friday’s price action may be the most recent lower high within the pattern. If Dogecoin retraces lower over the weekend, bullish traders will want to see the crypto bounce up from Thursday’s low-of-day at the 6.5 cent mark to create a bullish double bottom pattern. Bearish traders will want to see the crypto make new lows.
- Dogecoin has resistance above at $0.099 and the 12-cent mark and support below at $0.065 and the 5-cent area.
See Also: Dogecoin Stages Sharp Recovery