Dogecoin Breaks Down! Is The Dog Signaling A Bad Omen For Stock Market?

Dogecoin DOGE/USD was trading almost 8% lower on Saturday as the crypto continued to break down bearishly from a symmetrical triangle, which Benzinga pointed out on Wednesday.

The move lower was exaggerated, compared to Bitcoin BTC/USD, which was sliding about 2% lower but in line with Ethereum ETH/USD, which was also falling about 8%.

Traders and investors looking for weekend signals on the direction of the general markets for next week will be taking note of the bearish price action in the crypto sector, because the stock market and apex and popular cryptos have been trading in tandem lately.

The general markets have taken a beating recently and the Federal Reserve's inability to tackle soaring inflation so far has spooked investors of stocks and, seemingly, cryptos alike.

Dogecoin’s bearish break has set the crypto into a confirmed downtrend. A downtrend occurs when a stock consistently makes a series of lower lows and lower highs on the chart.

The lower lows indicate the bears are in control, while the intermittent lower highs indicate consolidation periods.

Traders can use moving averages to help identify a downtrend, with descending lower timeframe moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term downtrend and descending longer-term moving averages (such as the 200-day simple moving average) indicating a long-term downtrend.

A stock often signals when the lower low is in by printing a reversal candlestick such as a doji, bullish engulfing or hammer candlestick. Likewise, the lower high could be signaled when a doji, gravestone or dragonfly candlestick is printed. Moreover, the lower lows and lower highs often take place at resistance and support levels.

In a downtrend the "trend is your friend" until it’s not and in a downtrend, there are ways for both bullish and bearish traders to participate in the stock:

• Bearish traders who are already holding a position in a stock can feel confident the downtrend will continue unless the stock makes a higher high. Traders looking to take a position in a stock trading in a downtrend can usually find the safest entry on the lower high.
• Bullish traders can enter the trade on the lower low and exit on the lower high. These traders can also enter when the downtrend breaks and the stock makes a higher high, indicating a reversal into an uptrend may be in the cards.

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The Dogecoin Chart: Dogecoin broke down from the symmetrical triangle on increasing volume, which indicates the pattern was recognized by the algorithms. At press time, Dogecoin’s volume on Coinbase was measuring in at over 245 million, with multiple hours left to go in the 24-hour session. Dogecoin’s 10-day average volume comes in at about 258 million on Coinbase.

• Dogecoin’s most recent lower high was printed on June 9 at $0.081 and the most recent confirmed lower low was formed at the $0.077 mark the day prior. Eventually, Dogecoin will create its next lower low and traders and investors can watch for a reversal candlestick such as a doji or hammer candlestick to form, which could indicate a bounce to at least print another lower high is on the horizon.
• If Dogecoin closes the 24-hour trading session near its low-of-day, the crypto will print a bearish Marubozu candlestick, which could indicate lower prices will come again on Sunday. If the crypto bounces up to close the session with a lower wick, a hammer candlestick will print, which could signal a bounce is imminent.
• Traders can watch for a reversal to take place above or at the $0.065 mark because Dogecoin has found support there before, on May 12. Below that level, there is further support at 5 cents.
• When Dogecoin eventually bounces, it will find resistance at $0.075 and near the $0.083 mark.

See Also: Why Dogecoin Is Diving Today