Dogecoin Surge at Risk: Expert Foresees Quick Drop

Dogecoin’s Shifting Trading Landscape

As a new trading week begins, Dogecoin finds itself in a notably unstable position on its high time frame charts. While it may seem like a victory, the situation is evolving. According to a weekly analysis from the engineer known as Guangdong Cat in the Pseudonymous Market, the popular memecoin is testing resistance following a surprising two-week rally, which saw it rise around 80% from its lows in June. Analysts caution that despite a bullish structure, some short pullbacks might be necessary for further gains.

Is Dogecoin Overextended?

In the context of a log-Fibonacci retracement for the range projected over 2024-25, last week’s trading candle managed to slightly surpass the 0.618 level at $0.262. This level is crucial, as classic market principles suggest that reclaiming 61.8% retraces often signifies a transition from recovery to a trend expansion.

“It broke above the 0.618 log FIB, which can be a bullish backtest,” Guangdong Cat noted, adding that a return to that area could lead it back to a backtest scenario.

The Bollinger Band Panel suggests risks associated with the recent equilibrium. Dogecoin’s weekly close hit $0.267, marking its first time in 11 months to settle outside the upper band, which is currently near $0.262. These types of closures are uncommon on high-time frame charts and are usually succeeded by at least one candle that retreats toward the band.

“It’s sitting above the Bollinger band,” analysts remark. Historically, Dogecoin tends to struggle to maintain its height when the spread reaches extremes, often retreating to the central band around $0.19.

In a similar vein, a one-sided snapshot indicates progress that reflects the underlying momentum. The price has pushed beyond both the Tenkan-Sen and the Kijun-Sen, showing bullish momentum, yet it remains under the lower boundary of the weekly clouds. The lower cloud boundary is roughly around $0.28-0.29. This is also where Dogecoin stagnated at the end of last week’s trading period.

The engineer refers to this area as the “Resistance of the Iwaku Cloud” and warns that it should be treated cautiously as a supply zone until a significant close breaches the cloud. In the event of a short dip, the Kijun-Sen (near $0.23) and the 0.618 Fibonacci levels converge, indicating potential lower values.

This perspective is further supported by a supply and demand band highlighted in grey on the charts, which spans approximately $0.24 to $0.25, correlating with the base of the February breakdown range. In terms of chart patterns, this area serves as a neckline reference for double bottom patterns.

A potential retreat to this support could meet the Fibonacci backtest requirements while allowing for a re-entry into the Bollinger Bands, all while keeping the broader structure intact. The analyst visually represents this trajectory, suggesting a pullback to the grey zone followed by a push towards the mid-$0.30 range.

It’s essential to note that these observations do not undermine the long-term changes in the market structure. Back in July, the bottom ranged around $0.15, with 11 weeks of prior supply guiding the shift from sellers to buyers. The latest candles, albeit small, retain all profits from breakouts. As analysts suggest, “Overall, these are quite bullish developments, even if we see a drop earlier this week to reset some indicators.”