Shiba Inu Attempts Recovery With Dogecoin, Bitcoin: Why A Bigger Bounce May Come
Shiba Inu (CRYPTO: SHIB) was trading about 5% lower at press time, which represented somewhat of a recovery from the 27% decline the crypto had suffered earlier in the 24-hour trading period.
The cryptocurrency sector took a turn for the worse Wednesday evening, with Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH) and retail favorite Dogecoin (CRYPTO: DOGE) plummeting 12%, 18% and 23%, respectively, which brought the three cryptos to 52-week lows.
Shiba Inu narrowly avoided printing a new all-time low before bouncing up and may avoid that fate for the immediate future because the crypto looks set for a bigger bounce over the coming days.
The crypto’s relative strength index (RSI) is measuring at about 24%, which puts the stock in deep oversold territory.
RSI is an indicator technical traders use to measure bullish and bearish price momentum. RSI levels can range between 0 and 100, with levels between 30 and 70 generally considered to be healthy.
When a stock’s RSI falls below the 30% level, it's considered to be oversold. When a stock enters oversold territory, it indicates the securities price no longer reflects the asset's true value, which can signal a reversal to the upside is in the cards.
When a stock’s RSI rises above the 70% area, it is considered to be overbought. When a stock enters overbought territory, it signals the securities price is elevated to its intrinsic value, which can signal a reversal to the downside is on the horizon.
RSI is best used when combined with other signals and patterns on a stock chart because stocks can remain in oversold and overbought territory for an extended period of time before reversing.
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The Shiba Inu Chart: Shiba Inu is trading in a downtrend, with the most recent lower high printed on May 1 at the $0.00002216 mark and the most recent confirmed lower low formed at $$0.00001840 on April 30. Thursday’s low-of-day may become the next lower low within the pattern but Friday’s candle will need to print for confirmation.
- Higher prices are likely to come over the next few days, not only because Shiba Inu’s RSI is in oversold territory but because the crypto has developed bullish divergence on the daily chart. Bullish divergence occurs when a stock’s RSI makes higher lows and the crypto’s price makes lower lows. Eventually, the divergence will correct, which is most likely to occur with a rise in Shiba Inu’s price.
- If Shiba Inu closes the trading day above the $0.00001050 level, the crypto will print a long lower wick, which could indicate higher prices will come on Friday. If the crypto closes the trading day below that level, it is likely lower prices are on the horizon. The next most likely scenario is Shiba Inu will print an inside bar pattern on the daily chart to consolidate the sharp decline.
- Shiba Inu has resistance above at $0.00001349 and $0.00001734 and support below at $0.00000856 and $0.00000690.