The brief Dogecoin (DOGE) the rally in prices last week following Tesla CEO Elon Musk's bid to buy Twitter appears to be fading as DOGE closes the week up 8%.
DOGE price fell to $0.142 on April 17, three days after hitting a local high of $0.149. Dogecoin's correction, while modest, increased its potential to trigger a classic bearish reversal pattern with a success rate of 85% to hit your downside target.
DOGE Price Eyes Drop Below $0.10
Bent head and shoulders (H&S)the pattern appears when the price forms three peaks in a row, with the middle one, called the "head", between the other two, which are almost the same height, and therefore are called the left and right "shoulders".
These three peaks hold above a common support level called the "neckline". According to the theory, the price usually breaks below the neckline after forming the third peak, or the right shoulder, and falls as much as the maximum height of the H&S, that is, the distance between the top of the head and the neckline.
It appears that DOGE has been forming a similar structure since at least March 24. The cryptocurrency is now eyeing a neckline drop after forming its right shoulder, followed by a full-blown bearish breakout, as depicted in the chart below.
As a result, the probability of Dogecoin correcting towards its H&S neckline near $0.132 looks higher, roughly 7.5% below the current price. The level coincides with DOGE's 50-day simple moving average (50-day SMA - the blue wave), which provides additional support.
A decisive break move below the support confluence could risk triggering the H&S setup, with the downside target below $1, almost 30% below today's price.
Interestingly, the target appears near the lower trend line of the descending channel pattern that has engulfed Dogecoin price movements since December 2021.
The "musk effect"
Musk continues to be an influential catalyst behind Dogecoin's interim price trends.
The news that he bought a 9.2% stake in Twitter on April 4 helped increase the price of DOGE down more than 20% to $0.174 a day later, its best level in almost three months.
A correction followed as traders locked in interim earnings, only for DOGE price to rally again after Musk showed intentions to acquire Twitter in its entirety for $43 billion.
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Enthusiasts believe that the "musk effect"and his growing influence on Twitter could drive the adoption and price of Dogecoin, his sentiment promoted by Robinhood CEO Vladimir Tenev, who earlier this week he said DOGE could become the "currency of the Internet".
#dogecoin + Elon Musk + Twitter + Popularity = $10 future value go $ doge #DogecoinToTheMoon
โ Dogecoin and Bitcoin HODL (@HodlDogecoin) April 15, 2022
Musk has supported the idea so far, suggesting that Twitter's board introduce a DOGE payment option for the social media's Twitter Blue monthly subscription service.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.
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