Dogecoin (CRYPTO: DOGE) was trading slightly higher on Tuesday afternoon, after spiking up over 7% at one point earlier in the day.
The crypto was consolidating an almost 10% plunge on Monday, which was caused by a decline in both the cryptocurrency sector and the general markets, which saw Bitcoin (CRYPTO: BTC) falling over 6% and the S&P 500 losing 1.69%.
Dogecoin’s price action on Tuesday was completely within Monday’s trading range, which has settled the crypto into an 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 inside bar pattern leans bearish because the crypto was trading lower before forming the pattern, but traders and investors can watch for a break up or down from the mother bar later on Tuesday or on Wednesday to gauge future direction. There is also a possibility the crypto develops a double inside bar on Wednesday to further consolidate the recent volatility.
- On a bullish note, Dogecoin developed a bullish double bottom pattern at the $0.132 level on Monday and Tuesday, which, if recognized, may propel the crypto higher to force a bullish break up from the inside bar pattern. If the double bottom pattern isn’t recognized, and Dogecoin breaks down from the inside bar pattern, it may find support at the 50-day simple moving average, which is currently trending at about 13 cents.
- The number of upper wicks on the recent 24-hour trading candles indicates there is bearish pressure on Dogecoin. Each time Dogecoin attempts to rise higher, sellers and profit takers come in and drop the crypto down. If Dogecoin continues to consolidate sideways for a period of time, the crypto may eventually exhaust sellers, which could in turn bring in a higher number of buyers.
- Dogecoin has resistance above at $0.146 and 16 cents, and support below at the 13-cent mark and at 12 cents.
See Also: Dogecoin Whales Go Restless As 56M DOGE Move In One Transaction
Photo: Courtesy of Дмитрий Шустов on Flickr
