Elon Musk has been up to his usual antics- the eccentric Billionaire recently changed his profile picture on Twitter which featured a Shiba Inu. Crypto enthusiasts and observers were quick to point out the reference to Dogecoin, which has been rather quiet on the charts. The cryptocurrency responded by an immediate 15% jump but resumed its bearish movement as the dust settled in the market post the explosive move. At the time of writing, Dogecoin traded at $0.1794, down by 4.6% over the last 24 hours.
Dogecoin Daily Chart
Source: DOGE/USD, TradingView
A closer look at Dogecoin’s chart showed that its jump may have been triggered due to a number of reasons that were independent of Elon Musk’s Twitter presence. Yes, such events do take place from time to time. For instance, a move below the 200-SMA (green) may have been countered by reactionary buying which led to the sharp increase in price.
The rally may also have been triggered at a defensive region of $0.17-0.16. Nevertheless, its strong correlation with Bitcoin of 0.75 kicked in once again as prices traded moved south along with the broader market. If DOGE manages to close below $0.161, another 26% decline was possible towards $0.120. This would also lead to a breakdown from DOGE’s descending triangle.
Reasoning
The Relative Strength Index has moved close to the oversold region over the past few weeks and the fact that a reversal has not yet occurred was a sign of severe weakness in the market. The On Balance Volume maintained its decline as selling pressure continued to outmatch buying pressure. Moreover, the Aroon up was close to 0% whereas the Aroon down was close to 100%- a finding that indicated a strong bearish trend that showed no signs of a reversal just yet.
Conclusion
Shorting has been the way to go in the Dogecoin market and traders must adopt the same strategy moving forward as well. However, one must wait for confirmation of a move below $0.161 before entering into another short position. Conversely, a bullish outcome would depend on a move above the daily 20-SMA (red) which resided at $0.215.
