Dogecoin (DOGE) made a notable jump this week after Tesla CEO Elon Musk announced plans to buy influential social network Twitter. But as quickly as dreams of that takeover were shattered, the renewed hype surrounding DOGE was over.
While Dogecoin price is still expected to close with an 8% gain for the week, it has fallen to $0.142 as of today, April 17. An intermediate high of $0.149 was recorded three days earlier. Although this slowdown is relatively modest, investors still have reason to panic, as the price action over the past few days completes a pattern that has an 85% probability of a further slowdown.
Dogecoin price could crash to $0.1
The so-called “head and shoulders pattern” consists of three consecutive high points, which in their arrangement appear as a head between two shoulders. As a result, the top middle (head) protrudes the most, while both shoulders are slightly lower and about the same height.
The three high points also share a level of support on the underside called the “throat area”. In this negative price pattern, the third high is usually followed by a drop below that same cleavage which is about as steep as the maximum head height.
Since March 24, Dogecoin price has formed such a pattern, which is why a pulldown to the neck area is next after completing the right shoulder this week. If DOGE then slips below the “neckline” as expected, a crash to the lower trendline could follow (see price chart).
The first drop to the neckline at $0.132, which is 7.5% lower than the current Dogecoin price, is the most likely to start with. This mark coincides quite exactly with the 50-day simple moving average (50-day SMA, blue line), which is why the support is a bit stronger.
If these supports are nonetheless broken, the head and shoulders pattern will definitely be confirmed, with the price target falling to just $1, which would mean a 30% collapse for DOGE from current levels.
Interestingly, this price target is again close to the lower trendline of the descending channel that has framed Dogecoin price since December.
The “musk effect”
Regardless, the price spike of the past few days makes it clear that Tesla boss Elon Musk still has a direct influence on DOGE, even though its effect has now waned.
Following the April 4 announcement of Musk’s acquisition of a 9.2% stake in the social network Twitter, the price of Dogecoin initially rose by more than 20%. The high of $0.174 was also its best level in three months.
Crypto investors then took partial profits and thus drove the price down again, but when Musk announced a few days ago that he wanted to take over the social media completely, the cryptocurrency joke quickly escalated.
This shows that the so-called “musk effect”, which the Hamburg researchers demonstrated last February, still works and brings a noticeable boost to Dogecoin every time. Robinhood CEO Vlad Tenev also did his best this week to give DOGE a helping hand by promising it the potential to become the “currency of the internet”.
– Dogecoin and Bitcoin HODL (@HodlDogecoin) April 15, 2022
Elon Musk seems to support this reading, as the successful entrepreneur recently suggested that Twitter should introduce Dogecoin as payment for its own subscription service.
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