Is Dogecoin Ready For A Short Squeeze?
Dogecoin Short Positions In Spotlight
A topic that is widely discussed today is that Dogecoin short positions reached new highs on Bitfinex. Not surprisingly, some crypto traders are waiting for a short squeeze.
However, the total size of short positions in Dogecoin is not the only factor that can lead to a short squeeze. It’s important for buyers to be active and push Dogecoin’s price higher.
According to Google data, the interest in dogecoin peaked back in May, when the cryptocurrency was testing all-time high levels. Since then, the interest in Dogecoin has steadily declined, and so did the price of the coin.
Dogecoin did not manage to settle above $0.75 and pulled back towards $0.16 in July. It has made two attempts to gain sustainable upside momentum but faced significant resistance in the $0.34 – $0.35 range and declined towards the $0.20 level.
The popularity of Shiba Inu coin has clearly hurt Dogecoin as some traders shifted funds from one “dog coin” to another when Shiba Inu was rallying. It should be noted that Dogecoin remains bigger than Shiba Inu despite its poor performance in recent weeks. According to CoinMarketCap, Dogecoin is the 10th biggest cryptocurrency by market capitalization, while Shiba Inu is in the 12th place.
Dogecoin bulls must try to defend the coin’s current position as a move out of the top-10 will signal that Dogecoin may be losing its relevance. Trends are changing fast in crypto markets, and it is vitally important to show growth. Avalanche , which has a market cap of about $28.5 billion, is already very close to Dogecoin, whose market cap is roughly $29.5 billion.
Let’s take a look at Dogecoin’s weekly chart. Dogecoin managed to settle below the 20 EMA level at $0.2475 but failed to get to the test of the 50 EMA which is located at $0.2035. It should be noted that previous major pullbacks were stopped just above the 50 EMA, which serves as a major suport level for Dogecoin on the weekly chart.
Currently, Dogecoin is stuck between the 50 EMA and the 20 EMA, and it will need to get back above the 20 EMA on the weekly chart to have a chance to develop significant upside momentum and move towards the major resistance area at $0.34 – $0.35. In case Dogecoin stays inside the current trading range between the 50 EMA and the 20 EMA, there’ll be no chance for a real short squeeze.
On the daily chart, Dogecoin rebounded from the support level at $0.2150. The nearest resistance level for Dogecoin is located at $0.2270. In case Dogecoin manages to settle above this level, it will move towars the resistance at $0.2350.
A successful test of the resistance at $0.2350 will open the way to the test of the resistance at the 20 EMA at $0.24. If Dogecoin gets above the 20 EMA, it will continue its rebound and head towards the 50 EMA at $0.2465. Note that the 50 EMA on the daily chart is very close to the high end of the current range at the 20 EMA on the weekly chart, which means that $0.2465 – $0.2475 is the key resistance area for Dogecoin. In case Dogecoin manages to get above this area and moves above the $0.25 level, it will have a great chance to develop solid upside momentum.
On the support side, Dogecoin needs to settle below the support level at $0.2150 to continue its pullback. The next support level on the daily chart is located at $0.2050. This support level is located close to the support at the 50 EMA on the weekly chart, so $0.2035 – $0.2050 is the key support area for Dogecoin. A move below this area will push Dogecoin towards the support which is located at the lows of the previous major pullback at $0.1950.
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