Dogecoin (DOGE) Extends Downward Trend, Approaching Oversold Territory

Dogecoin has been on a downward trend since early March, losing most of its late 2024 gains and breaking below key support levels.

Dogecoin (CRYPTO: DOGE) has been trending downward since early March, erasing most of its late 2024 gains and breaking below a key support level.

Now, as the meme cryptocurrency trades around $0.1649, showing a 3.6% decrease in the past day, technical analysis offers mixed signals.

Here's a closer look:

Relative Strength Index Shows Extreme Oversold Levels

The Relative Strength Index (RSI) on the 1-hour chart has fallen into extreme oversold territory, with recent readings ranging from 25 to 27. On the 4-hour chart, RSI values are below 10, a less common occurrence that usually precedes a bounce.

The daily RSI is currently around 32-33, approaching but not yet reaching oversold territory, which is typically defined as RSI below 30. Such low levels suggest heavy selling pressure but also indicate that buyers might see an opportunity to enter at these price ranges.

One analyst on TradingView is assigning a 30-40% probability to DOGE dropping further to the $0.158-$0.159 support area. However, they are assigning a higher probability (60-70%) to a near-term bounce that could target the $0.172-$0.175 range.

Despite Short-Term Bearishness, Long-Term Technical Indicators Show Promise

Despite the bleak short-term outlook, long-term technical indicators suggest there are still reasons to be optimistic about Dogecoin.

Dogecoin continues to hold above its long-term ascending channel support, a trendline that has provided reliable support since 2015. This channel support is currently at around $0.15, and a breach of this level could have significant implications for the cryptocurrency.

The recent pullback also brought Dogecoin to approximately $0.17, a level slightly above the critical 0.786 Fibonacci retracement at $0.18395. If historical patterns repeat, this price point could mark a turning point before a move back toward the mid-range of the channel, which is estimated to be around $0.56.

On-chain data from ChainGlass provides another positive signal. The Accumulation/Distribution Line measured 20.28 billion Dogecoin recently, indicating that long-term holders continue to accumulate coins even as prices consolidate.

Wallet data from Santiment shows that large holders aren't rushing to sell. Addresses holding between 10 million and 100 million Dogecoin, as well as those holding between 100 million and 1 billion Dogecoin, have shown steady accumulation throughout March. This suggests that larger players may be positioning for potential upside.

Dogecoin is also trading below both the 50 and 200-period moving averages on the 12-hour chart, with the 50 SMA acting as resistance at $0.176. A reclaim of the $0.18 level could signal the start of a reversal, especially if supported by increasing volume.

Elon Musk recently addressed speculation about government use of Dogecoin. Despite the playful naming of the Department of Government Efficiency (D.O.G.E.), Musk confirmed that the U.S. government has no plans to use the cryptocurrency.

Musk stated he may be ending his role with D.O.G.E. by May, having set a goal to accomplish the agency's mandate within 130 days. He told Fox News, "I think we will have accomplished most of the work required to reduce the deficit by a trillion dollars within that timeframe."

Crypto analysts remain divided on the meme coin's future price action. Some, like Ali, a crypto analyst on X formerly known as Twitter, point to Dogecoin's history of strong rallies following major corrections.

"The lower boundary of the channel usually provides strong support, especially after a 70-80% correction like the one we saw in 2017 during the bull cycle and again in 2024," said Ali in a recent analysis.

Others note that potential catalysts include the SEC approval of proposed Dogecoin exchange-traded funds. From a technical perspective, the four-hour RSI breaching "oversold" territory combined with a breakout from a months-long falling wedge pattern may signal a recovery in the short term.

For near-term price action, market watchers will be focusing on how Dogecoin reacts at the current $0.165 level. If buyers step in, a move toward $0.172 or higher could happen quickly. But if selling pressure continues, DOGE might extend its decline before attempting recovery.

Dogecoin finds itself at a key inflection point. While price holds above its decade-long ascending channel and large wallets quietly accumulate, confirming a bullish trend will require a sustained breakout above $0.18.