Dogecoin (DOGE $0.4243) is retreating after reaching its highest levels since May 2021, suggesting a growing profit-taking sentiment among traders following Donald Trump’s win.
DOGE price rally overheating
DOGE’s price dropped by 14.25% from its local high of around $0.480, reaching $0.412 on Nov. 25. The top memecoin’s correction coincides with its daily relative strength index (RSI) reading floating above 70—which is considered an “overbought” area—for over two weeks.
The RSI crossing into this territory suggests that DOGE has been experiencing strong bullish momentum, potentially leading to a short-term price pullback as the rally overheats.
DOGE/USD daily price chart. Source: TradingView
The recent RSI top at 77.45 is a lower high compared to its Nov. 13 peak of 92.45. In the same period, Dogecoin has grown by over 22.65%, indicating a growing divergence between DOGE’s price and momentum.
Typically, such a divergence suggests that the bullish momentum behind the price surge may be waning.
So, even though DOGE’s price is climbing, the diminishing RSI strength indicates that fewer buyers are entering the market or that buying pressure is tapering off in the short term.
Bitcoin below $100K limits Dogecoin price upside
Dogecoin’s price drop is part of a broader crypto market decline, led by Bitcoin’s (BTC $98,179) pullback after almost hitting the $100,000 milestone.
BTC’s price fell by as much as 4% after hitting $99,800 on Nov. 22. That has sparked crypto market liquidations worth nearly $490 million in the last 24 hours, the highest during a weekend in more than half a year.
Long and shorts comprised $360.44 million and $128.93 million, respectively, with altcoins accounting for most liquidations.
Crypto market liquidation heatmap. Source: Coinglass
The Dogecoin futures market witnessed $31.72 million worth of liquidations, with longs amounting to around $21.72 million.
The large liquidations show that many traders were overly optimistic about DOGE’s price, expecting it to continue rising.
When the broader market, including Bitcoin, retreated, these traders were caught off-guard, leading to forced sell-offs that contributed to Dogecoin’s price decline.
DOGE price chasing 30% gains
Dogecoin’s ongoing price correction occurs after testing the upper trendline (~$0.44) of its prevailing ascending triangle as resistance.
Ascending triangle forms when the price trends between a flat resistance level and a rising trendline support, typically signals a potential continuation of the prevailing uptrend if the price successfully breaks above the resistance.
DOGE/USD daily price chart. Source: TradingView
As a technical rule, the potential price target after the breakout is calculated by adding the triangle height (distance between the initial resistance and the first low) to the breakout point.
Related: How high can the Dogecoin price go?
That said, a confirmed daily close above $0.44, accompanied by a significant increase in trading volume, would validate the bullish breakout, setting DOGE’s price on the path toward $0.56 by 2024’s end, up 30% from the current price levels.
Conversely, a pullback from the triangle’s upper trendline could send DOGE’s price down toward the lower trendline target of around $0.40.
