With market volatility pushing Dogecoin (DOGE) to retest its breakout level, some analysts are advising “cautious” optimism for the leading memecoin, arguing that weak bullish momentum could offset recent price action.
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‘Optimism with a seat belt on’
On Thursday, Dogecoin fell to a one-week low of $0.095 before bouncing back above the $0.098 support level. The cryptocurrency has fluctuated between $0.096 and $0.104 over the past six days, briefly hitting a multi-week high of $0.117 over the weekend.
Notably, after last week’s price increase, DOGE has broken its one-month downward trend line, fueling optimism among investors. However, market volatility has stalled the momentum of the leading memecoin, which is now moving sideways within its local range.
Market observer Whale Factor marked that Dogecoin has returned to “the ultimate support level” of $0.097. This level is a macro resistance turned support and has served as a key rebound area over the past two years.
“We’ve seen this happen twice before with huge gains. (…) If this horizontal support holds, the risk/reward for a long position here is insane,” he affirmed, adding that a recovery from this level could target the $0.15-$0.20 area.
Meanwhile, analyst Trader Tardigrade noted the recent performance, explaining that the breakout and subsequent retest of the downtrend line is “by-the-book bullish price action.” Nevertheless, he has warned that he is “cautiously optimistic” due to weak bullish momentum.
As he explained, the descending trendline has been retested over the past five days and held as support, with the print closing above the breakout level daily. This indicates that the structure remains bullish.
Despite this, the analyst believes that the rally “feels a bit underpowered” and that DOGE’s upward momentum is “lacking strength” as the price slowly returns to recently risen levels.
“The price needs to attract real demand for this breakout to be credible. Keep an eye on volume and stronger candles – until those pop up, it’s seat belt optimism,” he asserted.
Dogecoin to repeat previous performances?
Trader Tardigrade too be shows that Dogecoin appears to be mirroring the same pattern that has previously led to parabolic moves. According to the post, the memecoin has completed a ‘Solid Base structure’ twice before, first in 2016 and then in 2020.
The analyst emphasized that historically, “when DOGE finishes building these bases, it doesn’t take long for the outbreak to happen.” Now the cryptocurrency is at the edge of third base, with “the same long-term consolidation, the same gradual accumulation, the same compressed energy.”
This also applies to market watcher Bitcoinsensus observed that in previous cycles, Dogecoin “thrived in a strong risk environment,” typically breaking out after long periods of consolidation.
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Notably, the cryptocurrency saw a 95x move between 2017 and 2028, after breaking out of its macro consolidation range. It then registered a 310x rally towards its latest all-time high (ATH) after the 2020 breakout.
The chart shows that the altcoin could be at the end of its long consolidation period, and a parabolic move could begin next year. “If this cycle plays out like the last one, Dogecoin may have room to head towards the $5 zone,” the analyst concluded.
At the time of writing, DOGE is trading at $0.097, down 1.1% in the daily time frame.
Featured image from Unsplash.com, chart from TradingView.com
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