Dogecoin rallied to $0.50 after DOGE’s ‘overbought’ status cooled

After a 208% crash in early November, Dogecoin (DOGE) has been consolidating in a tight range between $0.35 and $0.48 for four weeks. DOGE's recent price correction resulted in a break below the uptrend line, indicating a reversal of a winning trend.

However, one analyst has suggested that Dogecoin may be on the verge of another rally from March 2024 based on a key technical indicator and repeat setup.

The increase of Dogecoin can happen “at any time”.

Despite a 16% drop this week, Trader Tardigrade, a crypto pattern analyst, has indicated that Dogecoin's strong overbought daily RSI signal has resumed.

An overbought condition on the Relative Strength Index (RSI) indicates the possibility that traders will sell the crypto asset, resulting in a short-term price decline.

Previously, a strong uptrend was observed on the daily chart, with the RSI's overbought condition returning to 50 in March 2024. Based on the chart, the analyst hinted that a break above $0.50 could happen “anytime” in the next few days.

Data analytics platform Sentiment Data also noted that DOGE's “Average Age of Dollar Invested” indicator is flashing. The average investment age for a crypto asset has dropped 31% in eight weeks, indicating that dormant coins are back in circulation. Regarding bullying speed, the forum mentioned in X's post,

“The bull markets of 2017 and 2021 similarly didn't stop until the average age of assets started to ‘rise' again” (aging).

Related: Most altcoins may see ‘slow bleed' until end of January 2025: VC

DOGE could see liquidity slide between $0.32 to $0.34.

While the long-term trend remains bearish, Dogecoin could fall to gather liquidity between $0.32 and $0.34 before making a higher high. As seen, DOGE's recent lows were hovered around $0.365 on November 26, but further liquidity lows remain around $0.34 and $0.32.

In the year In March 2024, a similar bullish breakout created liquidity lows around $0.12 and $0.10, after which DOGE retreated before resuming the trend.

An important observation is that when the 50-day EMA was tested (as described above), the RSI returned to 50. Other similar patterns include the daily bearish bearish pattern and an upward trendline breakout based on the strong similarity of the past and present setup.

Therefore, a retest of the 50-day EMA and a dip to $0.34 and $0.32 could occur before the next bullish leg is lifted.

Related: Buy Crypto ‘Buy the Dip' Moments to Last This Cycle: Hedge Fund Founder

This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.