Dogecoin (CRYPTO: DOGE) was trading almost 3% higher on Friday in a very tight trading range between $0.054 and $0.058.
The crypto has experienced high volatility recently, whipsawing up over 24% on Wednesday only to plunge about 12% on Thursday. On Friday, Dogecoin was consolidating on lower-than-average volume and settling 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 for 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: Both Thursday and Friday’s price action were taking place within Wednesday’s range, setting Dogecoin into the double inside bar pattern. Although the pattern leans slightly bearish because Friday’s inside bar is printing near the bottom of Thursday’s range, the crypto has fairly strong support at the 5-cent mark after testing the area on Tuesday and Wednesday and wicking up from the level.
- Traders and investors can watch for a break from the inside bar pattern later on Friday or over the weekend to gauge future direction. The second most likely scenario is that Dogecoin will continue to trade sideways for a period of time on decreasing volume as both sellers and buyers dry up.
- Dogecoin fell into a downtrend on June 10, when the crypto broke down bearishly from a symmetrical triangle pattern. After bouncing up from the 5-cent level, the downtrend ended, at least temporarily, and Dogecoin has been trading sideways since Tuesday.
- A bounce is likely to occur over the coming days, even if only to reject at $0.065, because Dogecoin’s relative strength index (RSI) is measuring in at about 31%. When a stock or crypto’s RSI reaches or falls below the 30% mark it becomes oversold, which can be a buy signal for technical traders.
- Dogecoin has resistance above at $0.065 and $0.083 and support below at 5 cents and the 4-cent mark.
