On Dogecoin charts, the emerging head and shoulders pattern indicates a lack of upward confidence among DOGE traders.
The short Dogecoin (DOGE) price rise that occurred last week in response to Tesla CEO Elon Musk’s offer to acquire Twitter looks to have peaked, as DOGE concludes the week up over 8%.
On April 17, DOGE’s price fell to $0.142, three days after reaching a local high of $0.149. Although the drop was minor, it increased Dogecoin’s ability to initiate a typical bearish reversal pattern with an 85 percent success chance of achieving its bottom goal.
The pattern, dubbed head and shoulders (H&S), occurs when the price produces three consecutive peaks, with the central one, dubbed the “head,” sandwiched by the other two, which are about equal in height and hence dubbed the left and right “shoulders.”
These three peaks are located above a similar level of support referred to as the “neckline.” According to the theory, the price often breaks below the neckline after the formation of the third peak, or right shoulder, and falls by as much as the H&S’s maximum height, defined as the distance between the top of the head and the neckline.
DOGE seems to have been erecting a similar building since at least March 24. After establishing its right shoulder, the cryptocurrency is now eyeing a drop to the neckline, followed by a full-fledged bearish breakout, as seen in the chart below.
As a consequence, Dogecoin’s likelihood of correcting toward its H&S neckline at $0.132, which is about 7.5 percent lower than today’s price, looks to be increasing. The level is also confluent with DOGE’s 50-day simple moving average (50-day SMA; blue wave), indicating extra support.
A significant breach below the support confluence might trigger the H&S scenario, with the downside objective falling below $1, about 30% below current levels.
The aim looks to be close to the bottom trendline of the declining channel pattern that has encircled Dogecoin’s price movements since December 2021.
The so-called “Musk effect”
Musk has been a significant trigger for Dogecoin’s intermediate price movements. On April 4, news of his purchasing a 9.2 percent interest in Twitter boosted DOGE’s price by more than 20% to $0.174 a day later, its highest level in over three months.
Following a fall as traders locked in temporary gains, the DOGE price rebounded following Musk’s announcement that he intends to purchase Twitter in its entirety for $43 billion.
Enthusiasts think the “Musk effect” and his expanding prominence on Twitter might improve Dogecoin acceptance and pricing, a belief echoed earlier this week by Robinhood CEO Vladimir Tenev, who suggested DOGE could become the “internet currency.”
Musk has so far endorsed the proposal, asking that the Twitter board add a DOGE payment option to the social media company’s monthly membership service Twitter Blue.