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DOGE price analysis suggests a 30% drop despite Elon Musk’s Twitter bid

Dogecoin (DOGE)’s brief rally last week following Tesla CEO Elon Musk’s bid to buy Twitter appears to have fizzled as DOGE closes the week up over 8%.

DOGE’s price fell to $0.142 on April 17, three days after hitting its peak of $0.149 locally. The Dogecoin correction, albeit modest, increased its potential to trigger a classic bearish reversal pattern, with an 85% success rate in hitting its downside target.

DOGE price eyes fall below $0.10

The pattern, referred to as Head and Shoulders (H&S), occurs when price makes three spikes in a row, with the middle one, known as the “head”, sandwiched between the other two, which are almost the same height and hence known as the left and right “shoulders”.

These three peaks hold above a common support level called the “neckline”. In theory, price typically breaks below the neckline after the formation of the third peak or right shoulder and falls by the maximum height of the H&S, ie the distance between the top of the head and the neckline.

It appears that DOGE has been forming a similar structure since at least March 24th. The cryptocurrency is now seeing a pullback to the neckline after forming its right shoulder followed by a full-fledged bearish breakout as illustrated in the chart below.

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DOGE/USD daily chart. Source: TradingView

As a result, Dogecoin’s probability of correcting towards its H&S neckline near $0.132 appears higher and is around 7.5% below today’s price. The level coincides with DOGE’s 50-day simple moving average (50-day SMA; the blue wave), thus providing additional support.

A decisive breakout move below the support confluence could risk triggering the H&S setup, with the downside target below $1, almost 30% below today’s price.

Interestingly, the target appears to be close to the lower trendline of the descending channel pattern that has been enveloping Dogecoin’s price action since December 2021.

The “musk effect”

Musk continues to be an influential catalyst behind Dogecoin’s interim price trends.

News that he had bought a 9.2% stake in Twitter on April 4 helped DOGE’s price surge a day later by more than 20% to $0.174, its best level in almost three months .

A correction ensued as traders raked in interim gains, only for DOGE price to bounce back after Musk revealed his intent to acquire Twitter outright for $43 billion.

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Enthusiasts believe that the “musk effect” and its growing influence on Twitter could boost Dogecoin’s acceptance and price, sentiment supported by Robinhood CEO Vladimir Tenev, who said earlier this week DOGE could become the “currency of the Internet”.

Musk has so far backed the idea, proposing to Twitter’s board of directors to introduce a DOGE payment option for the social media’s monthly subscription service, Twitter Blue.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.