Dogecoin (CRYPTO: DOGE) was trading slightly down on Thursday in continued consolidation after a 42% surge brought the crypto up from just below the 5-cent mark between June 19 and Monday.
The consolidation, which has been taking place over two 24-hour trading periods, has settled Dogecoin into a double inside bar pattern on the daily chart.
An inside bar pattern indicates a period of consolidation and is usually followed by a continuation move in the direction of the current trend.
An inside bar pattern has more validity on larger time frames (four-hour chart or larger). The pattern has a minimum of two candlesticks and consists of a mother bar (the first candlestick in the pattern) followed by one or more subsequent candles.
The subsequent candle(s) must be completely inside the range of the mother bar and each is called an "inside bar."
A double, or triple inside bar can be more powerful than a single inside bar. After the break of an inside bar pattern, traders want to watch for high volume for confirmation the pattern was recognized.
- Bullish traders will want to search for inside bar patterns on stocks or cryptos that are in an uptrend. Some traders may take a position during the inside bar prior to the break, while other aggressive traders will take a position after the break of the pattern.
- For bearish traders, finding an inside bar pattern on a stock or crypto that's in a downtrend will be key. Like bullish traders, bears have two options of where to take a position to play the break of the pattern. For bearish traders, the pattern is invalidated if the stock rises above the highest range of the mother candle.
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The Dogecoin Chart: Dogecoin’s price action on Wednesday and Thursday was taking place within Tuesday’s trading range, when the crypto enjoyed a bullish day, rallying almost 10%. Dogecoin’s inside bar leans bullish because the crypto was trading higher before forming the pattern.
- Dogecoin is also trading in an uptrend, with the most recent higher low printed on Tuesday at $0.058 and the most recent higher high formed at the $0.069 level on that same day. If Dogecoin breaks bearishly from the inside bar pattern, the crypto will form a lower low and negate the uptrend.
- If Dogecoin breaks up bullishly from Tuesday’s mother bar, the crypto will need bullish momentum to push it up above the 7-cent mark, which would keep the uptrend intact. If Dogecoin is able to trade above that level, it will also regain support at the 21-day exponential moving average (EMA).
- Dogecoin is trading above the eight-day EMA but the indicator is trending below the 21-day EMA. If Dogecoin recaptures the 21-day as support and is able to remain above the level for a period of time, the eight-day EMA will cross above the 21-day, which would give bullish traders more confidence going forward.
- Dogecoin has resistance above at $0.065 and $0.083 and support below at 5 cents and the 4-cent level.
