Is Dogecoin going to be the next big mover in Crypto?
Dogecoin has been making a buzz in social media and crypto communities lately. What started as a joke now is getting a lot of attention online. As the hype around the meme-coin begins, Dogecoin may offer exciting trading opportunities.
Let’s look at the recent price action and what we can do about it as the new technical setups are developing.
Dogecoin price action pre-story
One of the most attractive aspects of Dogecoin is its early stage of price development: the actual price is cheap as it’s measured in cents, and the market capitalization is still small. The coin is trading in the long, quiet range that’s been taking place for a while, until recently.
As you see from the Daily chart below, Dogecoin has been in a narrow range for the last two months of 2020.
At the beginning of 2021, the market made its first powerful breakout, which tripled the coin’s price.
Since then, the market has been digesting gains for nearly a month, as people were taking fast profits, and the long-term buyers were stepping in.
As Dogecoin is getting more attention online, the recent breakout that happened at the end of January sent the cryptocurrency higher with even more power, eight times increasing the price in a couple of days.
After such impressive growth, the coin gave up around 50% of its value, which is fairly typical for this early and aggressive bullish environment. A similar “rotation” happens – short-term traders take their fast money, and the various longer-term “believers” are happy to receive the coin with a hope of a more significant gain.
What matters for the price action traders?
From what we see solely on the daily chart, we can already plot the ascending trendline (see the inclined black line), as the lows are getting higher and roughly a local resistance around 0.04-0.045 (the grey rectangle).
These kinds of technical signs that the price action gives us are all that we need to plan our trades successfully.
Let’s drop down to the hourly chart to determine more specifically how to trade the Dogecoin in this environment.
Intraday price action
In the hourly chart below, we can see in detail how the “pump” was developing. After such explosive growth, it’s normal to expect a sharp correction as any surge cannot continue infinitely. In the case of Dogecoin, the first correction impulse gave up around 50% of the move, and you should be ready for this kind of outcome.
If you happen to hold a position during such a move, you should take at least partial profits with the first signs of correction and see what happens next.
After the first correction move, which reached 0.35, the market started to form the triangle structure (marked with the blue arrows in the chart below) as bulls and bears kept fighting for the short-term trend resolution.
Eventually, the down border of the correction structure got broken, and the market morphed into the consolidation phase.
At the end of January and the beginning of February, the market attempted to ramp higher, proceeding with the higher lows for the next several days. Based on the higher lows, we plotted the ascending trendline, which signals that buyers keep stepping in and are interested in buying the coin at higher prices.
Eventually, the market stabilized between the 0.03 support and 0.04 resistance.
How to trade this setup?
If you want to use the setup, it’s better to let the market tell us the exact timing. Thus we need a price action signal to participate in the move.
Ideally, we want to see an exaggerated breakout move, above 0.045, possibly even until 0.05 (see the blue arrow in a circle in the chart below).
After the initial impulse, it would be great to see the pullback to the resistance-turned-support around 0.04-0.045. If we see the signs that the support holds and the market starts recovering towards 0.05, we can consider a buy entry.
The expected move potential should be the recent high around 0.085-0.09, which gives you roughly 100% gain on a trade if attained. Once in a position, make sure you manage your risk appropriately.