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Dogecoin Price Bounces 40% – Has the DOGE Correction Ended?

Last Updated May 6, 2024 9:35 AM
Valdrin Tahiri
Last Updated May 6, 2024 9:35 AM
By Valdrin Tahiri
Verified by Peter Henn

Key Takeaways

  • After a 48% correction, the DOGE price has bounced 40% since its May 1 low.
  • The price has completed a five-wave downward movement since March 18.
  • Is the bounce a relief rally, or has the entire DOGE correction ended?

The Dogecoin price was mired in a 32-day correction starting on March 28. The correction seemingly ended on May 1, and DOGE has created five successive daily bullish candlesticks since then.

DOGE bounced afterward, saving a long-term horizontal support area and confirming the end of the downward movement. However, uncertainty looms on whether this is the end of the entire correction or just its first portion.

DOGE Completes Five-Wave Downward Movement

The DOGE price has fallen since its yearly high of $0.228 on March 18. The decrease followed a five-wave downward movement (white), ending with a low of $0.120 on May 1.

The defining characteristics of this wave count are the symmetrical triangle in wave four and the fact that waves one and five have an exactly 1:1 ratio. The bounce also saved the $0.125 horizontal area, despite a brief drop below it (green icon).

The daily RSI supports the continuing of the upward trend. The indicator broke out from its bearish divergence trend line (green) and moved above 50.

Wave Count
DOGE/USDT Daily Chart | Credit: TradingView

Even though the recovery has been swift and notable, it is not yet clear if the entire correction is complete. If so, DOGE will break out and close above the 0.618 Fibonacci retracement resistance level at $0.188. This is also a horizontal resistance area.

On the other hand, a rejection can indicate the rally is only the B wave in an A-B-C corrective structure, and the DOGE price will eventually return to the $0.125 area. So, whether the DOGE price closes above $0.188 or gets rejected will determine if the price increases to new highs or gets rejected.

Nevertheless, the ongoing bounce squashed concerns about the long-term support area of $0.125 breaking, which was a pressing issue during the downward movement in the end of April.

Dogecoin 40% Correction Leads to Retest of Support – Will DOGE Price Bounce or Breakdown?

Despite a bounce on April 13, DOGE failed to create a bullish structure. Rather, it broke down on April 24 and fell below the April 13 lows of $0.130. The May 1 close was the lowest in 42 days.

DOGE’s decrease since March 28 has had a magnitude of 48%. Since the price is approaching a critical long-term horizontal area, the question arises if DOGE will bounce, marking an end to the correction, or if the fall will deepen instead.

Dogecoin Returns to Long-Term Support

The weekly time frame technical analysis shows the DOGE price has nearly returned to the $0.125 horizontal support area. This area has been the most important one for DOGE  since April 2021, shortly before the price reached its all-time high of $0.739.

The area first provided support in March 2022 before turning to resistance in October 2022 (red icon). Then, after DOGE broke out in February 2024, it validated it as support the next month. Now, DOGE is returning to the area again.

Dogecoin Price Returns to Long-Term Support
DOGE/USDT Weekly Chart | Credit: TradingView

Weekly time frame indicators reiterate the importance of this area. The RSI is approaching 50 from above (green circle), something that can lead to a bounce. Additionally, the MACD has nearly made a bearish cross (red circle).

Due to the proximity of these indicators to key levels, whether DOGE bounces or breaks down will likely determine if the RSI and MACD bounce and reject the bearish cross, respectively.

DOGE Price Prediction: Is the Correction Over?

The daily time frame chart shows the DOGE price broke out from an ascending parallel channel in the beginning of March, leading to the yearly high of $0.228 on March 28. The price began a downward movement afterward and has fallen inside the confines of the channel.

Dogecoin Price Correction Movement
DOGE/USDT Daily Chart | Credit: TradingView

There is a strong support level at $0.122, created by the middle of the channel and the 0.618 Fibonacci support level. While the correction has been deep, it is only 0.2 times as long as the preceding upward trend, as evidenced by the Fibonacci time tool. So, it is likely the decrease is only the first part of a larger correction.

The daily RSI and MACD align with this, since they are both falling and neither have generated any bullish divergences.

Will the Dogecoin Price Bounce or Breakdown?

Finally, the short-term six-hour time frame shows the price is in the fifth and final wave of a downward trend. This will likely mark the end of the first phase of the correction. The defining feature of this count is the symmetrical triangle observed within wave four.

DOGE Nearing End of the Correction
DOGE/USDT Six-Hour Chart | Credit: TradingView

The most likely target for the bottom of this move is at $0.121, created by the 1.27 external Fibonacci retracement of wave four (black), and giving waves one and five a 1:1 ratio.

So, this scenario suggests the DOGE price will bounce at the long-term support of $0.125 instead of breaking down.

First Phase of the Correction Nearing its End

To conclude, the DOGE price correction is likely nearing its end. The long-term price action suggests a bounce at $0.125 is expected, and the short-term count aligns with this, predicting that this is the final drop before a reversal. It is unclear if this will mark the end of the correction, or if it will simply be a relief rally. In both cases, a bounce is likely.

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