Dogecoin (CRYPTO: DOGE) was trading about 3% lower on Friday, in a continued sideways lull between the range of $0.075 and 9 cents that has plagued the crypto for much of the last three weeks.
The sideways trading pattern has been due to lower-than-average volume, which indicates a current lack of interest in the crypto from both the bulls and the bears. The consolidation has also formed Dogecoin into a double inside bar pattern on the daily chart.
An inside bar pattern indicates a period of consolidation and is usually followed by a continuation move in the direction of the current trend.
An inside bar pattern has more validity on larger time frames (four-hour chart or larger). The pattern has a minimum of two candlesticks and consists of a mother bar (the first candlestick in the pattern) followed by one or more subsequent candles. The subsequent candle(s) must be completely inside the range of the mother bar and each is called an "inside bar."
A double, or triple inside bar can be more powerful than a single inside bar. After the break of an inside bar pattern, traders want to watch for high volume for confirmation the pattern was recognized.
- Bullish traders will want to search for inside bar patterns on stocks that are in an uptrend. Some traders may take a position during the inside bar prior to the break while other aggressive traders will take a position after the break of the pattern.
- For bearish traders, finding an inside bar pattern on a stock that's in a downtrend will be key. Like bullish traders, bears have two options of where to take a position to play the break of the pattern. For bearish traders, the pattern is invalidated if the stock rises above the highest range of the mother candle.
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The Dogecoin Chart: Dogecoin’s double inside bar pattern has formed over the last three 24-hour trading periods, with the mother bar created on Wednesday and the inside bars formed on Thursday and Friday. The pattern is neutral in this case because Dogecoin isn’t showing other bearish or bullish signs in combination with the inside bars.
- Dogecoin’s lower-than-average volume will eventually be followed by an influx of volume to break the crypto from the inside bars and sideways trading pattern. Traders and investors can watch for a break of the mother bar on higher-than-average volume over the coming days to gauge future direction.
- Dogecoin is trading below the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending below the 21-day, both of which are bearish signals. The eight-day EMA has been acting as heavy resistance for a few months and if Dogecoin is unable to regain the level the indicator may continue to guide the crypto lower.
- Dogecoin has resistance above near 10 cents and the 12-cent mark and support below at $0.075 and $0.065.
