Crypto Update: DOGE Shows Weakness Amidst Resistance
Dogecoin’s (DOGE/BTC) meteoric rise at the end of August 2018 stirred a lot of excitement in the cryptocurrency world. At its lowest, the pair lost close to 70% of its value from the 2018 high of 0.00000114. Then on August 30, DOGE/BTC breached resistance of 0.0000004 and broke out of a large descending triangle pattern. In less than two weeks, it skyrocketed by as much as 175% as it soared to 0.0000011 on September 10.
At that point, however, the altcoin was showing signs of weakness. To make matters worse, DOGE/BTC faces its heaviest resistance. We look at these concerns in this article.
Bulls Look Exhausted
A growth of over 100% in less than two weeks is not a sustainable run even in parabolic cases like the one we see in DOGE/BTC. Eventually, the parabola will burst as momentum fades and buyers lose interest. We’re seeing these early signs of a burst in this pair.
Daily chart of DOGE/BTC
The altcoin struggles to continue its ascent as buyers take a step back. You can see this on the decreasing flows. Volume has steeply declined from the initial days of the parabolic rally.
That’s because buyers are smart. The altcoin has climbed significantly, and they don’t want to put their capital at risk by buying the possible top. They can see that the pair is in extreme overbought territory. More importantly, a bearish divergence can be spotted.
These signs tell us that DOGE/BTC will most likely correct in the coming days. The probability of a pullback is significantly increased when you factor in the massive resistance of 0.000001.
DOGE Up Against Key Resistance
Switch to the weekly chart and you’ll quickly see that DOGE/BTC faces a nightmare resistance at 0.000001. This resistance has been repelling bullish rallies since 2014. This is as strong as a resistance can get in the crypto world.
Weekly chart of DOGE/BTC
Historical data shows that DOGE/BTC has massively retraced after hitting resistance of 0.000001 while in overbought conditions. The risk is too high and the reward is very low for buyers at this level. On the other hand, this can actually be a sweet setup to short the market.
Bullish Case for DOGE/BTC
At this point, a drop to the 61.8% Fibonacci level is in the best interest of the market from a long-term standpoint. If the market finds footing at 0.00000068, then it is on the way to create a large ascending triangle on the weekly chart.
Possible ascending triangle for DOGE/BTC
If you want to breach a major resistance, the ascending triangle is one the patterns that you should be looking for. The price compression and the pressure from the higher low should make it extremely difficult for bears to defend the resistance. More importantly, the dip to 0.00000068 will enable the pair to cool down technical indicators and create the ideal conditions for a breakout.
The DOGE/BTC pair has risen from the dead in a big way in the last couple of weeks. However, it is showing signs of weakness as it tries to breach resistance of 0.000001. We believe that the market needs to significantly correct if it’s going to stand a chance to take out the resistance.
Featured image courtesy of Shutterstock.