Dogecoin (CRYPTO: DOGE) was trading slightly higher Wednesday after crashing on Tuesday.
The cryptocurrency markets entered into turmoil prior to El Salvador purchasing 550 Bitcoin (CRYPTO: BTC), which President Nayib Bukele implied was due to the International Monetary Fund attempting to sabotage the countries adoption of the cryptocurrency as legal tender.
While Bitcoin was trading lower still on Wednesday, Ethereum (CRYPTO: ETH) regained some of its losses and Dogecoin looked to be following suit.
See Also: How to Buy Dogecoin
The Dogecoin Chart: On Tuesday Dogecoin printed a bullish hammer candlestick with a low lower wick, which indicated a reversal back to the upside. On Wednesday the crypto looked to be printing either a second hammer candlestick, if Dogecoin closes the day above the 26-cent mark, or a long-legged doji candle, if it closes near $0.256. A hammer candle would be bullish going forward while a long-legged doji would be neutral.
Wednesday’s candle was also completely within the trading range of Tuesday’s price action. An inside bar signals consolidation and can precede a larger move higher or lower. For technical traders, when a stock or crypto prints an inside bar in an uptrend, a move higher is most likely while when the pattern is created in a downtrend the opposite is anticipated.
Dogecoin tested support at the 23-cent level and bounced upwards indicating bulls bought the dip. 23 cents is a key level because Dogecoin has tested the level multiple times in the past and it has acted as both support and resistance. Dogecoin has not crossed below 23 cents since Aug. 7.
Dogecoin is trading below the eight-day and 21-day exponential moving averages (EMAs) and the retracement on Tuesday caused the eight-day EMA to cross below the 21-day, both of which are bullish for the short term. Dogecoin is trading above the 200-day simple moving average (SMA), however, which indicates overall sentiment in the crypto is bullish.
- Bulls want to see continued consolidation, perhaps in the form of a second daily inside bar on Thursday, and then for big bullish volume to come in and break the crypto back up above the 27-cent mark. If Dogecoin can regain the level as support it has room to move up toward 31 cents.
- Bears want to see big bearish volume come in and drop Dogecoin down below the 23-cent level and the 200-day SMA. If the crypto loses the areas of support it could fall toward the 16-cent area.