Dogecoin (DOGE), the leading meme coin, has been navigating a horizontal channel since August 8, with its price oscillating between $0.09 and $0.10. Recently, DOGE has inched closer to the resistance level, sparking hopes of a breakout. However, a troubling negative divergence between DOGE’s price and trading volume could impede its upward momentum.
The Horizontal Channel Dilemma
In technical terms, Dogecoin’s horizontal channel represents a market where buying and selling pressures are in equilibrium. The upper boundary at $0.10 acts as resistance, while the lower boundary at $0.09 serves as support. Since the channel’s formation, DOGE has experienced a 4% price increase over the past week, attempting to push past the resistance level.
Despite this rally, a concerning trend has emerged. Trading volume has plummeted by 37% over the same period, creating a negative divergence with the rising price. This disparity suggests a weakening of buying pressure, raising the risk of a price decline rather than a breakout.
Volume Decline and Whale Activity
A robust uptrend is usually marked by increasing trading volume, which indicates growing interest and participation from market players. However, the current decline in trading volume implies that fewer traders are driving the recent price surge. Additionally, data from IntoTheBlock reveals a 100% drop in large holders’ netflow, signaling that whale activity has dwindled significantly.
When whale activity diminishes, it often signals a bearish outlook. Large holders selling off their positions can exert downward pressure on the price, making a breakout more challenging.
Bulls Struggle to Reclaim Control
Despite these challenges, bullish signals are emerging. The Elder-Ray Index, which measures the strength of buyers versus sellers, has shown positive readings since August 20, a shift from its previously negative trend. The current Elder-Ray Index stands at 0.0037, suggesting a potential increase in bullish momentum.
Moreover, DOGE’s Parabolic Stop and Reverse (SAR) indicator, which helps identify price direction and potential reversal points, has been positioned below the asset’s price since August 10. This positioning typically indicates buyer control and supports potential upward movement.
Also Read: Dogecoin’s Daily Trading Volume Hits $1 Billion: Can DOGE Break Out of $0.12 Resistance?
Looking ahead, Dogecoin’s next move will be pivotal. A successful breach of the $0.10 resistance could propel DOGE to $0.11. However, if the breakout fails, DOGE might retreat to the $0.09 support level and could even drop further to $0.08, negating the current bullish expectations.
As DOGE tests this crucial resistance level, traders and investors will be closely watching for signs of a breakout or a reversal. The interplay of volume, whale activity, and technical indicators will determine the meme coin’s next significant price movement.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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