- Dogecoin price drops for six consecutive gains.
- Bears wipe out nearly all of the 50% gains generated from January 11.
- A successful retest of the falling wedge will likely generate a new uptrend.
Dogecoin price action has been an absolute joy for short-sellers – but that joy may turn bitter very soon. Dogecoin broke out of the rising wedge pattern on January 13 and is just now retesting that trendline breakout.
Dogecoin price shows resiliency among crypto wide rout
Dogecoin price experienced a strong bounce and rally off of the weekly lows and the upper trendline of the falling wedge pattern. At the same time, DOGE could be developing the beginning of the right shoulder of an inverse head-and-shoulders pattern, signaling a bullish reversal in the future.
Another reason for a bullish outlook in the immediate future is the presence of a Tower Pattern on the Point and Figure chart. However, tower patterns are rare and only form when two columns develop an equal number of boxes in each column; ten or more is the requirement. The entry on a tower pattern is the three-box reversal.
A hypothetical long entry trade setup is now open for Dogecoin price. The long idea is a buy stop order at $0.17, a stop loss at $0.15, and a profit target at $0.315. The current O-column can move two more boxes lower before the Tower Pattern is invalidated. As DOGE moves lower, the entry and stop follow in tandem, but the profit target at $0.315 remains the same.
The trade idea represents a 7.25:1 reward/risk setup for Dogecoin price. However, targets with such a wide range between the entry and profit target very rarely hit; there are normal pullbacks and whipsaws involved on the way. For that reason, a three-box trailing stop would help protect any implied profit generated post entry.
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