Dogecoin Pulls Back as These Indicators Signal Conditions Overbought – But Here’s Why the DOGE Outlook Remains Strong
After surging more than 10% on Tuesday, its biggest one-day gains since early April, Dogecoin (DOGE) has succumbed to profit-taking on Wednesday and was last trading around 3.5% lower.
Dogecoin hit its highest level since April on Tuesday around $0.084 as traders bid the meme coin up on hopes it will be integrated as a payment tool into Elon Musk’s X platform, which the precocious billionaire just rebranded from Twitter.
But DOGE has since pulled back to just under $0.08 after a few short-term technical indicators began to flash that conditions had become overbought.
Firstly, DOGE’s 14-Day Relative Strength Index (RSI) jumped above 70 on Tuesday, signifying the market had entered overbought territory.
The last time Dogecoin’s RSI went above 70 back in April, this was the trigger for significant profit-taking and a quick market reversal.
Meanwhile, Dogecoin’s latest jump saw it break to the north of its 20-Day Bollinger Bands – i.e. meaning that the price had jumped two standard deviations above its 20-Day Moving Average, which is only expected to occur 5% or less of the time.
Traders often interpret a Bollinger Band breakout as a sign the market has gone too far.
In wake of the signal from these two indicators, it shouldn’t be too surprising to see that DOGE is suffering amid elevated profit taking.
Despite Wednesday’s downside, the Dogecoin outlook remains strong.
From a fundamental standpoint, hype surrounding Twitter’s rebranding to X may continue to act as a tailwind, given many expect Musk to integrate Dogecoin into a future payments platform, which should bolster demand for the coin.
Indeed, traders appear to be buying the intra-day dip aggressively, with Dogecoin futures margin funding rates having just jumped to their
Read more on cryptonews.com
