Dogecoin Rally to $0.50 Imminent as Overbought Conditions Ease

Dogecoin Rally to $0.50 Imminent as Overbought Conditions Ease

Dogecoin (DOGE) has experienced a period of consolidation following its 208% breakout in early November, trading within a tight range between $0.35 and $0.48 for the past four weeks. While a recent price correction has seen DOGE dip below an ascending trendline, suggesting a potential bearish shift, some analysts believe Dogecoin could be gearing up for another upward rally, potentially pushing its price towards $0.50 or higher.


Overbought Conditions Easing

Despite a 16% decline this week, Dogecoin’s technical indicators suggest a possible uptrend. According to crypto pattern analyst Trader Tardigrade, Dogecoin's overbought conditions, as indicated by its daily Relative Strength Index (RSI), have now cooled off. The RSI, which measures the momentum of an asset, had previously signaled an overbought market—often a precursor to a short-term price pullback. However, as the RSI returns to a more neutral level, around 50, the conditions are ripe for a potential breakout.


The analyst highlighted that similar price movements were seen in March 2024 when the RSI eased back from overbought territory, and DOGE began a strong uptrend. Tardigrade suggested that if the same pattern plays out, a breakout above $0.50 could occur "at any time."


Bullish Indicators

Additional data from the analytics platform Santiment further supports the bullish outlook for Dogecoin. The platform observed a 31% drop in DOGE’s "mean dollar invested age" over the past eight weeks, a metric that tracks the average age of coins in circulation. A decrease in this figure signals that dormant coins are being reactivated, a sign often associated with increased market activity and the potential for higher prices.


Santiment noted that previous bull markets, such as those in 2017 and 2021, didn't experience a slowdown until the mean age of assets began to rise again, indicating that investors were holding onto their coins longer. This shift could signal that the conditions for a bullish run are aligning once again for DOGE.


Potential Liquidity Swipe

While the overall trend for Dogecoin remains positive, there is still the possibility of a short-term pullback. DOGE may dip to collect liquidity in the $0.32 to $0.34 range before resuming its upward trajectory. In late November, DOGE’s price reached a low of $0.365, but liquidity could still be gathered at lower levels, around $0.32 and $0.34. A similar pattern was seen in March 2024, where DOGE retraced after a breakout and tested liquidity lows around $0.12 and $0.10 before continuing its bullish trend.


Technical analysis shows that a retest of the 50-day Exponential Moving Average (EMA), currently around $0.34, could occur before Dogecoin sets up for its next bullish leg. The recent breakout below the ascending trendline and the daily bearish engulfing pattern also point to the potential for a temporary drop, similar to what happened in March.


Looking Ahead

The technical setup for Dogecoin remains promising, with key indicators signaling that the asset could be on the cusp of another rally. As overbought conditions cool and liquidity is potentially collected at lower levels, Dogecoin could break above $0.50 in the near future, continuing its bullish momentum. However, traders should remain cautious of a possible short-term dip before the uptrend fully materializes.


With these technical and on-chain signals aligning, DOGE could be poised for another significant price move, potentially reaching new highs as the broader crypto market evolves into 2025.

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