Dogecoin DOGE/USD surged over 17% higher during Tuesday’s 24-hour trading session before retracing slightly to trade up about 10% of the Monday session close.
The crypto hit the 9-cent level where it ran into a group of sellers, likely due to Dogecoin’s relative strength index, which was measuring in at about 70%, putting the crypto into overbought territory.
RSI is an indicator technical traders use to measure bullish and bearish price momentum. RSI levels can range between zero and 100, with levels between 30 and 70 generally considered to be healthy.
When a stock’s RSI falls below the 30% level, it's considered to be oversold. When a stock enters oversold territory, it indicates the securities price no longer reflects the asset's true value, which can signal a reversal to the upside is in the cards.
When a stock’s RSI rises above the 70% area, it is considered to be overbought. When a stock enters overbought territory, it signals the securities price is elevated to its intrinsic value, which can signal a reversal to the downside is on the horizon.
RSI is best used when combined with other signals and patterns on a stock chart because stocks can remain in oversold and overbought territory for an extended period of time before reversing.
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The Dogecoin Chart: Dogecoin began trading in an uptrend on July 26, with the most recent higher low formed on Aug. 12 at $0.069 and the most recent confirmed higher high printed at the $0.075 mark the day prior. On Tuesday, Dogecoin continued to surge higher but the move was hampered by the crypto’s extended RSI.
- Dogecoin was also breaking up from a bullish inside bar pattern the crypto had developed over the course of Sunday and Monday’s 24-hour trading sessions. When Dogecoin retraced from the high-of-day on Tuesday, the crypto was holding above Sunday’s high-of-day, which is bullish.
- The move higher on Tuesday came on higher-than-average volume, which indicates an upswing in interest for the crypto. At the time of writing, Dogecoin’s volume on Coinbase was measuring in at a massive 1.2 billion compared to the 10-day average of 401.27 million.
- Dogecoin is trading above the eight-day and 21-day exponential moving averages, with the eight-day EMA trending above the 21-day, both of which are bullish indicators. The eight-day EMA has been guiding Dogecoin higher since Aug. 5, and short-term traders may want to use a loss of the eight-day as a stop if the crypto falls below the level.
- Traders who aren’t already in a position may choose to wait for Dogecoin to print its next higher low, which may take place at the eight-day EMA on the next retracement. Traders can watch for the crypto to print a bullish reversal candlestick, such as a doji or hammer candlestick, above the level.
- Dogecoin has resistance above at $0.099 and 10 cents and support below at $0.083 and $0.075.
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