Dogecoin (CRYPTO: DOGE) was trading over 5% lower on Wednesday in tandem with Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH), which were down over 4% and almost 6%, respectively, amid a bearish day in the general markets.
Dogecoin’s volume has been increasing over the past four 24-hour trading sessions, which indicates interest may be returning to the crypto, although unfortunately for the bulls, the bears are gripping control.
The crypto may be headed for another dip over the coming days, but if Dogecoin falls lower, a bounce is likely to become imminent because crypto’s relative strength index (RSI) has been hovering between 26% and 34% since May 9.
RSI is an indicator technical traders use to measure bullish and bearish price momentum. RSI levels can range between 0 and 100, with levels between 30 and 70 generally considered to be healthy.
When a stock or crypto’s RSI falls below the 30% level, it's considered to be oversold. When a stock enters oversold territory, it indicates the securities price no longer reflects the asset's true value, which can signal a reversal to the upside is in the cards.
When a stock or crypto’s RSI rises above the 70% area, it is considered to be overbought. When a stock or crypto enters overbought territory, it signals the security's price is elevated above its intrinsic value, which can signal a reversal to the downside is on the horizon.
RSI is best used when combined with other signals and patterns on a chart because cryptos and stocks can remain in the oversold and overbought territory for an extended period of time before reversing.
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The Dogecoin Chart: On Wednesday, Dogecoin was attempting to break bearishly from a triangle pattern the crypto has been trading in since May 13. As of press time, the volume on lower timeframes wasn’t registering in high enough to indicate the pattern is being recognized, but traders and investors can watch for continuation later in the 24-hour period to indicate momentum to the downside is on the horizon.
- If Dogecoin closes the trading session near its low-of-day price, the crypto will print a bearish Marubozu candlestick, which could indicate lower prices will come again on Thursday. If the crypto closes the trading day with a lower wick, it could indicate a move to the upside is in the cards.
- If Dogecoin trades lower on Thursday, its RSI is likely to drop back into oversold territory, which could indicate a bounce will come. When Dogecoin’s RSI dropped to the 26% level on May 12, the crypto rallied 16% the following day.
- Dogecoin has resistance above at $0.09 and the 10-cent level, and support below at $0.065 and 5 cents.
