Dogecoin (DOGE) price is showing signs of a bullish reversal in the weekly time frame. Despite this, another short-term downward movement is expected prior to a long-term reversal.
DOGE price has been falling underneath a descending resistance line since reaching an all-time highest price of $0.073 in May 2021.
Including the high, the line has been validated six times so far (red icons), most recently in Oct. Lines get weaker each time they are touched, so an eventual breakout from this line seems likely.
The downward movement has so far led to a DOGE price low of $0.049 in June 2022. This amounted to a decrease of 93% since the aforementioned all-time high.
The price bounced after the low, created a long lower wick (green arrow) and validated the $0.051 horizontal area as support. This is a crucial horizontal area that provided support in the beginning of the upward movement in 2021.
More importantly, the weekly RSI has generated bullish divergence for the first time in history (green line). Such divergences often precede a significant upward price movement.
As a result of the divergence and price action, an eventual breakout from the descending resistance line seems likely.
If one occurs, it could greatly accelerate the rate of increase and confirm that the ongoing correction is now complete.
DOGE price breakdown could lead to new lows before a reversal
The daily chart supports the possibility that the DOGE will create another low prior to reversing and initiating the weekly breakout.
The first reason for this is that the price of Dogecoin has broken down from an ascending wedge. Afterward, it validated the wedge as resistance. Moreover, the price has also validated the $0.069 horizontal area as resistance (red icons).
Technical indicators also support the continuation of the downward price movement, since the RSI has fallen below 50 and broken down from its ascending support line.
As a result, it is likely that DOGE will fall towards the $0.051 horizontal long-term support area once more.
Despite this bearishness, it is worth mentioning that a couple of important updates for Dogecoin could be soon released. Well-known DOGE enthusiast @Mishaboar tweeted that a new update should release this year while another could follow in March.
Long-term price breakout remains likely
To conclude, mainly due to the bullish divergence in the weekly RSI, a DOGE breakout from the long-term descending resistance line is the most likely scenario.
A fall to $0.051 is expected prior to this breakout. An increase above the $0.069 high would indicate that the short-term downward price movement is complete, and the long-term breakout has begun.
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