Dogecoin (CRYPTO: DOGE) was plunging 11% lower during Saturday’s 24-hour trading session, which Benzinga called out as the most likely scenario on Friday due to a bearish lean on the crypto’s inside bar pattern.
The Shiba Inu-themed crypto fell below the important psychological support level at 5 cents on Saturday, and future price action could become even more grim.
Dogecoin isn’t alone in its bearish price action. Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) were also breaking down on Saturday, plummeting over 13% and almost 18%, respectively, at press time.
As Dogecoin has fallen below the 5-cent mark, the crypto is at least likely to bounce back up to that level over the coming days, because Dogecoin is developing bullish divergence on the daily chart.
Bullish divergence occurs when a stock makes a series of lower lows over a specific timeframe, while the relative strength index (RSI) oscillator makes a series of higher lows. Divergence suggests that the bulls are regaining control and can mark an imminent reversal of a downtrend.
Divergences are best used when combined with other signals and patterns on a stock or cypto’s chart, because the existence of divergence doesn’t indicate when a possible reversal will occur.
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The Dogecoin Chart: With Dogecoin breaking down below 5 cents, it indicates the downtrend is still intact. Dogecoin’s most recent lower high was printed on June 15 at $0.063 and the most recent confirmed lower low was formed at the $0.049 mark the day prior, but bulls came in and bought the dip, causing Dogecoin to close the 24-hour trading session above the 5-cent level.
- On July 13, Dogecoin’s RSI dropped to the 19% level, but since that date, the crypto’s RSI has made a series of higher lows. The higher lows on the RSI indicate bullish momentum, which means either Dogecoin will have to plummet further to cause its RSI to drop below 20% or the price of the crypto will have to bounce up to form a higher low.
- If Dogecoin closes the trading day near its low-of-day price, the crypto will print a bearish Marubozu candlestick, which could indicate lower prices will come again during Sunday’s trading session. If the crypto is able to find buyers and close the trading session with a lower shadow, Dogecoin will print a hammer candlestick, which could indicate a bounce is on the horizon.
- Dogecoin has resistance above at $0.065 and $0.083 and support below at the 4-cent mark.
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