A brutal correction witnessed in Dogecoin price dropping by almost 85% appears to have come to a halt this month

A brutal correction witnessed in the Dogecoin price from May 2021 to February 2022, which saw the price drop by almost 85%, appears to have come to a halt this month.

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DOGE/USD 4-hour chart | Source: TradingView

Dogecoin price rebounds 30% in two weeks

DOGE experienced a sharp drop in buying as its price dropped to around $0.10 two weeks ago, leading to a 30% recovery to $0.14 on March 27. Meanwhile, the retracement level The coin’s upside retracement stems from support forming a “falling wedge” set up, signaling an extended bullish reversal in the upcoming weekly sessions.

Specifically, a falling wedge pattern occurs when prices trend lower while oscillating between two converging, downward-sloping trendlines. In a perfect scenario, the setup results in the price breaking out of the descending range to the upside by the maximum distance between the wedge’s upper and lower trend lines.

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DOGE/USD weekly price chart featuring ‘falling wedge’ pattern | Source: TradingView

DOGE’s bounce from the lower trendline of the wedge two weeks ago opens the possibility of a continuation of the upward trend towards the upper trendline – near $0.18. Therefore, a break of the upper trendline further sees Dogecoin’s price rise to $0.37, up more than 150% from today’s price.

Veteran investor Tom Bulkowski considers falling wedges a “bad performer” when predicting bullish chart patterns, noting that “failure breakeven rates are high and prices are low on average.” He cites a study of 800 trades showing that the probability of a falling wedge breakout meeting its upside target is close to 62%.

Additionally, Dogecoin’s track record of showing a period of high positive correlation with Bitcoin – at 0.94 from a perfect score of 1 on March 27 – also could limit its upside if the latter declines due to ongoing macroeconomic and geopolitical pressures.

Dogecoin’s latest rebound move now eyes a quick run-up towards the $0.15-0.19 area, a range encapsulating three psychological resistance levels: the 20-day exponential moving average (20-day EMA; the green wave), the 50-day EMA (the red wave), and the 0.618 Fib line (near $0.19) of the Fibonacci retracement graph — all shown in the chart below.

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DOGE/USD daily price chart | Source: TradingView

A strong pullback, accompanied by a rise in volume from the said resistance area, could have DOGE test the 0.786 Fib line near $0.10 as its interim downside target. Conversely, a decisive move above the range could result in an extended upside momentum towards $0.24, focusing on $0.30 and $0.37 (also the falling wedge target).

Conversely, a decisive move above the range could result in an extended upside momentum toward $0.24, focusing on $0.30 and $0.37 (also the falling wedge target).

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