Dogecoin is erupting higher on the day, up more than 20% so far on Tuesday.
However, bulls are likely somewhat discouraged with the price action, despite the lofty gains. That’s as dogecoin was up almost 40% at one point in the day.
He wrote that, “Tesla will make some [merchandise] buyable with Doge & see how it goes.”
That gave a huge lift to the cryptocurrency and it’s not hard to see why. While Musk has been bullish on dogecoin in the past, the cryptocurrency has really been struggling lately.
In April, dogecoin found a huge wave of momentum thanks to Musk. Now investors are wondering if the same thing can happen again.
While Musk has also been supportive of other cryptocurrencies — like bitcoin — dogecoin seems to be a bit more influenced by his actions. Or at least by his tweets.
Let’s look at how the charts are setting up now.
Look at all the interest that Musk stoked in April and May, which temporarily sent dogecoin north of 75 cents.
However, the downfall has not been fun. The cryptocurrency fell hard from the highs, collapsing almost 80% to the low near 16 cents and weekly VWAP measure in late June.
That 16 cent level and weekly VWAP measure had been decent support for months, buoying dogecoin in July and October.
However, VWAP support failed earlier this month, while dogecoin has been precariously resting in the 15 to 16 cent range before Tuesday’s news.
With today’s rally, dogecoin has been rejected by the 50-week moving average and is now trying to hold above the weekly VWAP measure and downtrend resistance (blue line).
That’s not the best look, but at a minimum, bulls need to see it hold this area. If it can’t, the 15 to 16 cent range is back in play and if it fails as support, it puts the most recent low on deck near 12.5 cents.
On the upside, a move up through Tuesday’s high could put the 50-day and 200-day moving averages in play. Above the latter could put the November high on the table near 30 cents.
Dogecoin isn’t my favorite cryptocurrency, as it was created as a joke and lacks relative strength compared to ethereum and bitcoin. Just keep the levels in mind when trading it.