Dogecoin was up 116.7% over the last week, after billionaire Elon Musk took over Twitter
The Dogecoin price rally extended further on Oct. 29 in hopes that the cryptocurrency would get a major boost from Elon Musk’s Twitter acquisition.
Elon Musk boosts Dogecoin price again
Dogecoin price jumped by nearly 75% to reach $0.146 on Oct. 29, the biggest daily gain since April 2021. Notably, the meme coins’ massive intraday rally came as a part of a broader uptrend that started earlier this week on Oct. 25. In total, DOGE’s price gained 150% during the Oct. 25-29 price rally.
The surge was also accompanied by a decent increase in its daily trading volumes. That coincided with a spike in the number of DOGE transactions exceeding $100,000, according to Santiment. Both indicators suggest a growing demand for Dogecoin tokens among rich investors, or so-called “whales.”
Dogecoin whale transaction count | Source: Santiment
The jump across Dogecoin’s key metrics reflects investors’ excitement about Elon Musk’s Twitter acquisition on Oct. 27. Earlier this year, the billionaire entrepreneur had flirted with the idea of making Dogecoin a payment method to purchase the Twitter Blue subscription. Musk’s Tesla and SpaceX already accept DOGE payments for their merchandise.
$DOGE, the official currency of Twitter.
— David Gokhshtein (@davidgokhshtein) October 28, 2022
However, due to a classic technical indicator, Dogecoin’s ongoing price rally is starting to look overstretched.
The relative strength index (RSI), a momentum indicator determining the degree of recent price changes to analyze overbought or oversold levels, has risen to 93.69 on the daily Dogecoin chart. This is the highest level since April 2021, a month before the DOGE price rallied to its record high of $0.75.
Therefore, the “overbought” conditions do not necessarily mean an immediate bearish reversal. But they reflect the current euphoric buying momentum in the market, which sooner or later prompts the price to trend sideways or correct downward.
On a weekly chart, Dogecoin’s 2018-2020 bear market sheds light on similar price action. Notably, DOGE crashed by almost 95% two years after peaking at $0.0194 in January 2018.
DOGE/USF 4-hour chart | Source: TradingView
The token’s correction period saw it trending inside a descending channel. It broke out of the range to the upside in July 2020 but followed the upside move with a sideways consolidation trend — between its 0 Fib line of 0.0022 and 0.236 Fib line of $0.0054 — until December 2020.
In comparison, Dogecoin’s ongoing bear market is shorter but shows a similar trajectory to the 2018-2020 period, as shown above. Therefore, DOGE may fluctuate inside its current 0-0.236 Fib line range (or the $0.055-$0.176 range) following its descending channel breakout.
In other words, if the fractal plays out as intended, DOGE could correct toward $0.055 by the end of this year, down about 60% from current price levels. Conversely, an immediate breakout above the 0.236 Fib line could have DOGE eye $0.25 as its next upside target.
Read more:
- Astonishing Amount Of Shiba Inu Was Transferred In Merely Two Transactions, While Price Showed Large Fluctuations
- Slightly Over 400 Million Dogecoin Shifted From Top 20 Wallet To Binance Consecutively