Dogecoin sees an “oversold” jump as DOGE price loses 90% of annual gains

Dogecoin (DOGE) is showing the prospect of a strong price rally after hitting a confluence of technical support on May 12.

DOGE price 25% bounce incoming?

DOGE’s 45% price drop to $0.065 this week, or a 90% drop from its record high of $0.76 a year ago, was met with decent buying sentiment. As a result, the token staged a modest price recovery on May 12, surging over 10% to $0.078.

Interestingly, Dogecoin’s bullish retracement move started near a confluence of two support levels: a multi-month downward sloping trendline and a horizontal line that preceded a 335% price rally in the week ended April 19 last year.

Weekly DOGE/USD price chart. Source: TradingView

Meanwhile, the falling trendline is part of a broader descending channel pattern. Its multiple retests as support over the past 12 months propelled DOGE’s price towards the channel’s upper trendline. If the pattern repeats, Dogecoin’s recovery will extend towards the upper trendline near $0.1, up almost 25% from today’s price.

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Weekly DOGE/USD price chart with “descending channel” setup. Source: TradingView

The upside setup is also picking up on indications of Dogecoin’s daily Relative Strength Index (RSI), which is now near its oversold 30 line – a buy signal.

Conversely, a decisive move below Confluence support risks sending DOGE to $0.04, which served as a strong support level in the February-April 2021 session. That would mean another 40% drop in price before the next possible rally.

Elon Musk versus the Federal Reserve

The recent sell-off in the Dogecoin market coincides with similar sentiment across the crypto and traditional markets, led by the Federal Reserve’s decision to aggressively tighten monetary policy to curb rising inflation.

Dogecoin, similar to its top-tier peers Bitcoin (BTC) and Ethereum (ETH), has also been hit by the panic surrounding the de-pegging of two popular stablecoins: TerraUSD (UST) and Tether (USDT).

With DOGE above its technical support levels, the next potential bull case is none other than Tesla CEO Elon Musk.

The billionaire investor who has become one of Dogecoin’s most famous supporters recently bought Twitter for $44 billion. Prior to the acquisition, he had proposed to Twitter’s board of directors to accept DOGE as payment for their first-ever subscription service, Twitter Blue.

Twitter has not revealed any plans to use DOGE for payments. But the prospect of it could set a price floor under the token in the coming weeks.

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