A brutal correction witnessed in the Dogecoin (DOGE) market between May 2021 and February 2022, which saw the price dropping by almost 85%, appears to have come to a halt this month.
DOGE/USD rebounds 30% in two weeks
DOGE experienced strong dip-buying when its price crashed to levels around $0.10 two weeks ago, resulting in a 30% rebound move to $0.14 as of March 27. Meanwhile, the coin‘s upside retracement originated at a support level that constitutes a “falling wedge” setup, signaling an extended bullish reversal in the weekly sessions ahead.
In detail, a falling wedge pattern occurs when the price trends lower while fluctuating between two downward slopings, converging trendlines. In a perfect scenario, the setup results in the price breaking out of the descending range to the upside, rising by as much as the maximum distance between the wedge‘s upper and lower trendlines.
DOGE/USD weekly price chart featuring ‘falling wedge’ pattern. Source: TradingView
DOGE‘s rebound from the wedge‘s lower trendline two weeks ago opens up its possibilities to continue the move upside toward the upper trendline — near $0.18. As such, breaking above the upper trendline further exposes Dogecoin‘s price rise toward $0.37, up more than 150% from today‘s price.
Veteran investor Tom Bulkowski sees a falling wedge as a “poor performer” when it comes to predicting bullish chart patterns, noting that their “breakeven failure is high and the average price is low.” He cites a study of 800 trades that shows that the possibility of a falling wedge breakout meeting its bullish target is near 62%.
Additionally, Dogecoin‘s track record of showing a period of highly positive correlation with Bitcoin (BTC) — at 0.94 against the perfect score of 1 as of March 27 — could also limit its bullish bias if the latter drops due to ongoing macroeconomic and geopolitical pressures.
The correlation coefficient between DOGE/USD and BTC/USD. Source: TradingView
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