Dogecoin enters a zone of support; is it the right time to go long

Disclaimer: The findings of the following analysis are the sole opinions of the writer and should not be considered investment advice

• Dogecoin saw huge volatility on 8 November, alongside the rest of the market
• Technical findings showed a strong bearish bias, although a bounce could occur

When news of a major exchange being insolvent breaks, it is only likely that the entire market sees panic. News of a “strategic transaction” between FTX and Binance might apply bandages on investor confidence, but the selling pressure might continue in the days to come. Dogecoin already had a bearish outlook on lower timeframes.

Read Dogecoin’s Price Prediction 2022-23

Dogecoin has posted losses of nearly 43% from its local top on 1 November. More pain was likely to follow, although the intervention of a zone of support meant a bounce in prices could occur.

Significant capital flow out of the Dogecoin market over the past week

Source: DOGE/USDT on TradingView

The rally in late October and early November brought Dogecoin to the forefront of social media engagement around crypto. This enthusiasm came in the wake of Elon Musk’s takeover of Twitter. Rumors that DOGE could be used as payment within Twitter for various services fueled the bullish fires.

The carnage of the past two days, although severe, was not the beginning of the downtrend for DOGE. Rather, the beginning of the move down can be traced back to when $0.134 was flipped to resistance on 5 November.

The lower timeframe market structure flipped to bearish, and technical indicators began to show strong selling pressure. The RSI slipped below the neutral 50 mark on 3 November and was unable to reclaim it as support. Meanwhile, the CMF has also been below -0.05 for the best part of the past week. Hence, both momentum and volume were bearish.

The 2-hour chart showed the formation of a bearish breaker for DOGE back on 28 October. The charts showed the meme coin to have bounced from this zone, but it was uncertain whether a leg upward can begin. The $0.1 and $0.11 levels can offer good shorting opportunities targeting $0.078 and $0.065 to the south.

Open Interest tanks after the local peak and buyers remain discouraged

Source: Coinglass

On 1 November, the Open Interest peaked at $754 million. Since then it has declined to $291 million, according to Coinglass data. Alongside the drop in OI, the price has also been on a decline. Hence, it was a bearish finding. Bulls who drove the upward rally have likely taken profit.

Especially in the wake of recent events, many speculators were likely on the sidelines waiting for more price action to develop. Although from a technical standpoint DOGE can experience a bounce, its market structure has shifted to a bearish inclination.