Dogecoin Price Jumps 25% But Faces Imminent Reversal Risk

Dogecoin’s price has experienced a significant rally, increasing by 25% in the last 24 hours, pushing it to a seven-month high. Currently trading close to $0.20, DOGE is inching toward a major resistance level that, if broken, could fuel further gains. 

However, the risk of an imminent reversal is high as market indicators suggest a possible trend shift for the meme coin.

Dogecoin is Overbought

Dogecoin’s market sentiment reveals that 94% of its total supply is now in profit. This is a signal that the asset is nearing a market top.

When the majority of an asset’s supply reaches a profit peak, it often triggers a saturation point known as a local top. At this stage, DOGE’s price growth may begin to slow, making it increasingly susceptible to a trend reversal.

Historically, market tops for assets like DOGE lead to price declines as holders opt to secure profits. This pattern puts DOGE at risk for a correction, especially as the cryptocurrency has reached new highs that encourage investors to cash out. Such levels of profit-taking typically signal the end of an uptrend and the onset of short-term selling pressure.

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DOGE’s macro momentum is also showing signs of strain, as reflected by the Relative Strength Index (RSI). The meme coin’s RSI is currently above 70.0, placing it in the overbought zone.

When the RSI crosses this threshold, it often indicates that an asset’s bullish momentum has peaked, potentially leading to a pullback. This is particularly relevant for Dogecoin, which has historically seen short-term corrections each time it breaches the overbought range.

The overbought signal suggests that DOGE holders may start selling to lock in gains. This selling pressure could initiate a pullback, especially if broader market cues turn less favorable. With the RSI in overbought territory, DOGE’s price might struggle to sustain the current rally, increasing the likelihood of a downward adjustment.

DOGE Price Prediction: Key Barrier Ahead

Dogecoin’s recent 25% surge has brought its price up to $0.19, just below the significant resistance level of $0.20. This barrier, last breached in mid-April, presents a key test for DOGE’s ongoing rally. If DOGE fails to break through, the price could face a reversal.

Should a reversal occur, DOGE could fall toward the support level at $0.17 or even further down to $0.14. The high profits and overbought RSI strengthen the case for a possible correction, especially if profit-taking increases.

Read more: Dogecoin (DOGE) Price Prediction 2024/2025/2030

However, if the broader market remains bullish, DOGE may successfully breach the $0.20 resistance level, continuing its uptrend and invalidating the bearish outlook. A sustained rally beyond $0.20 would position Dogecoin for further gains, potentially supporting a longer-lasting bull run.