Dogecoin DOGE/USD was showing weakness in comparison to Bitcoin BTC/USD and Ethereum ETH/USD on Monday, slipping over 8% at one point to trade under the 9-cent mark.
The move lower caused Dogecoin to fall under the lower descending trendline of a falling channel pattern, indicating the current downtrend is more dominant than the channel.
When Dogecoin reached its low-of-day at $0.084, bulls came in and bought the dip, causing the crypto to attempt to print a hammer candlestick.
A hammer candlestick pattern forms when a red or green candlestick with a long lower wick and a short upper body is printed, resembling a hammer.
A hammer candlestick, when found in a downtrend, can indicate that a reversal to the upside is on the horizon. It is a lagging indicator, however, because the next candle on the timeframe being studied must print before the pattern can be validated.
A hammer candlestick doesn’t necessarily mean a new uptrend will occur, only that a bounce higher is likely imminent.
Candlestick patterns can be used to indicate the future price direction of a stock. Candlestick patterns are especially useful for technical traders when they are combined with other indicators such as larger patterns, trading volume, relative strength index (RSI) and divergences between RSI and price action.
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The Dogecoin Chart: Dogecoin reversed into a downtrend on Dec. 1, making a fairly consistent series of lower highs and lower lows. The crypto’s most recent lower high was formed on Friday at $0.099 and the most recent confirmed lower low was printed at the $$0.093 mark two days prior.
If Dogecoin reacts to the hammer candlestick during Tuesday’s 24-hour trading session and bounces, the crypto may find resistance at the eight-day and 21-day exponential moving averages (EMAs), which are currently trending at about $0.095. The 50-day simple moving average, which Dogecoin fell under on Sunday, is also trending at that level.
Bulls want to see Dogecoin pop up to close the session back within the falling channel pattern, which could indicate Monday’s plunge was a bear trap. Bears want to see the crypto reject the lower descending trendline of the channel and then for big bearish volume to push Dogecoin lower within its downtrend.
Dogecoin has resistance above at $0.091 and $0.099 and support below at $0.083 and $0.075.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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