As market volatility causes Dogecoin (DOGE) to retest its breakout levels, some analysts are recommending “cautious” optimism for the leading meme coin, arguing that bearish bullish momentum could override recent price action.
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“Wear your seatbelt and you'll be optimistic”
On Thursday, Dogecoin fell to a one-week low of $0.095 before rebounding above the $0.098 support level. The cryptocurrency has fluctuated between $0.096 and $0.104 over the past six days, and at one point reached a multi-week high of $0.117 over the weekend.
Notably, DOGE broke out of the month-long downtrend line after last week's price surge, sparking optimism among investors. However, market volatility has halted the momentum of the major meme coin and it is currently trading sideways within its local range.
Market observer Whale Factor highlighted that Dogecoin has returned to the “ultimate support level” at $0.097. This level is a macro resistance-turned-support and has served as a major rebound area for the past two years.
“We've seen two developments with massive pullbacks so far. (…) If this horizontal support holds, the risk and reward for a long position here is insane,” he asserted, adding that a pullback from this level could target the $0.15 to $0.20 area.
Meanwhile, analyst Trader Tardigrad commented on the recent performance, describing the breakout and subsequent retest of the downtrend line as “textbook bullish price action.” Nevertheless, he cautioned that he remains “cautiously optimistic” as bullish momentum remains weak.
As he explained, the downtrend line has been retested and held as support over the past five days, with daily closing prices above the breakout level. This shows that the structure remains bullish.
Nevertheless, the analyst believes this rally is “feeling a bit underpowered” as the price gradually recovers from recent gains, and believes DOGE's uptrend momentum is “lacking strength.”
“For this breakout to be credible, price has to attract real demand. Keep an eye on volume and punchy candlesticks. Until that happens, buckle up and be optimistic,” he argued.
Will Dogecoin repeat its previous performance?
Trader Kumamushi also pointed out that Dogecoin appears to be reflecting the same pattern that caused the parabolic move earlier. According to the post, Memecoin has completed a “solid base structure” twice so far, first in 2016 and then in 2020.
The analyst emphasized that historically, “once DOGE finishes building these bases, it doesn't take long for a breakout to occur.” Currently, cryptocurrencies are on the edge of the third stronghold, with “the same long-term consolidation, the same gradual accumulation, the same compressed energy.”
Similarly, market watcher Bitcoin Census observed that in past cycles, Dogecoin “grew in a strong risk-on environment,” typically breaking out after extended price movements.
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Notably, cryptocurrencies moved 95x between 2017 and 2028 after exiting the macro consolidation range. It then rallied 310x to its most recent high (ATH) after its 2020 breakout.
This chart shows that the altcoin may be nearing the end of its long consolidation period, and a parabolic move could begin next year. “If this cycle plays out similarly to previous cycles, Dogecoin may have room to push towards the $5 zone,” the analyst concluded.
At the time of writing, DOGE is trading at $0.097, down 1.1% on a daily basis.
Featured image from Unsplash.com, chart from TradingView.com
