Dogecoin (CRYPTO: DOGE) was surging more than 11% higher on Tuesday after consolidating with an inside bar on Monday.
The consolidation, paired with Dogecoin’s 18% rise on Sunday has set the crypto into an uptrend pattern on the daily chart.
An uptrend occurs when a stock consistently makes a series of higher highs and higher lows on the chart.
The higher highs indicate the bulls are in control while the intermittent higher lows indicate consolidation periods.
Traders can use moving averages to help identify an uptrend with rising lower time frame moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term uptrend and rising longer-term moving averages (such as the 200-day simple moving average) indicating a long-term uptrend.
A stock often signals when the higher high is in by printing a reversal candlestick such as a doji, bearish engulfing or hanging man candlestick. Likewise, the higher low could be signaled when a doji, morning star or hammer candlestick is printed. Moreover, the higher highs and higher lows often take place at resistance and support levels.
In an uptrend the "trend is your friend" until it’s not and there are ways for both bullish and bearish traders to participate in the stock:
- Bullish traders who are already holding a position in a stock can feel confident the uptrend will continue unless the stock makes a lower low. Traders looking to take a position in stock trading in an uptrend can usually find the safest entry on the higher low.
- Bearish traders can enter the trade on the higher high and exit on the pullback. These traders can also enter when the uptrend breaks and the stock makes a lower low indicating a reversal into a downtrend may be in the cards.
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The Dogecoin Chart: Dogecoin’s most recent high in its uptrend was printed on Sunday at the $0.0629 level and the most recent higher low was formed at $0.057 on Monday. On Tuesday, Dogecoin soared up above the most recent higher high, which confirmed the uptrend is intact.
- Dogecoin reversed into the uptrend on Saturday, when the crypto failed to close the 24-hour trading session below the psychologically important 5-cent area, which added confidence for bullish traders that the bottom may be in. Bullish rallies to the upside always take place in bear markets, however, so traders should remain cautious that this swing to the upside could be short-lived.
- Tuesday’s move higher caused the bullish divergence that had developed on Dogecoin’s chart to correct, which also indicates there is momentum to the upside. Bullish divergence occurs when a stock or crypto fails to make a series of higher lows but the relative strength index does make a series of higher lows.
- If Dogecoin closes the trading day with a long upper wick, it may print a shooting star candlestick, which could indicate lower prices will come on Wednesday. If this happens, traders can watch for the crypto to form a reversal candlestick, such as a doji or hammer candlestick, above the most recent higher low.
- Bearish traders want to see increasing selling pressure drop Dogecoin down below Monday’s low-of-day, which will negate the uptrend and indicate Tuesday’s price action was a bull trap.
- Dogecoin has resistance above at $0.083 and just below the 10-cent level. The crypto has support below at $0.063 and at 5 cents.
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