Dogecoin DOGE/USD was spiking up over 3% higher at one point on Saturday, showing strength in comparison to Bitcoin BTC/USD and Ethereum ETH/USD, which were trading flat.
On Friday, Benzinga pointed out a bounce was likely to come because at that time Dogecoin was printing a hammer candlestick on the daily chart. While Dogecoin didn’t close the 24-hour trading session with a hammer candlestick, the crypto ended up printing a long-legged doji candlestick, which is also a bullish reversal indicator.
Dogecoin has settled under a descending trendline on the daily chart, which acts as a resistance level and indicates there are more sellers than buyers, causing the price to continue to fall.
In order for a trendline to be considered valid, the stock or crypto must touch the line on at least three occasions. After that, the more times the trendline is touched, the weaker it becomes.
- Bullish traders can watch for a stock or crypto to break up from the descending trendline and, if the break happens on high volume, can indicate the downtrend is over and a rally may be on the horizon. It’s possible the stock or crypto may fall down to back-test the descending trendline as support before heading higher again.
- For bearish traders, “the trend is your friend” (until it’s not) and a touch and rejection of the descending trendline can offer a good short entry. A bearish trader would stop out of this type of trade if the stock or crypto breaks above the trendline.
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The Bullish Case For Dogecoin: Bulls want to see bullish volume come in and break Dogecoin up from the descending trendline, which could signal a big reversal to the upside is in the cards. If Dogecoin is able to break up from the trendline, it will also regain support at the eight-day exponential moving average (EMA), which will give bulls more confidence going forward.
Dogecoin has resistance above at $0.135 and $0.146.
The Bearish Case For Dogecoin: Bears want to see Dogecoin continue to reject the descending trendline, which has happened on the past two occasions that the crypto attempted to break the trend. If Dogecoin continues to reject that area as resistance, the trendline and the eight-day EMA could continue to guide the crypto lower until it loses support at the 12-cent level.
Dogecoin has support below 12 cents at the 10-cent mark, which is an important psychological level.
See Also: How to Read Candlestick Charts for Beginners
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