Dogecoin and Shiba Inu Show Signs of Recovery Amid Market Correction
Dogecoin and Shiba Inu are showing signs of a potential recovery after a sharp decline amidst a broader cryptocurrency market correction. The meme coins are mirroring each other’s movements, with technical indicators suggesting a possible breakout.
- Dogecoin is gradually recovering after a steep fall during a wider crypto market correction.
- Shiba Inu is following Dogecoin’s lead, preparing for a potential weekend rally.
- Technical analysis points to a possible wedge breakout in both meme coins, fueled by bullish RSI divergences.
The meme coin market capitalization has decreased by over 5% to $56.34 billion in the last 24 hours. Dogecoin (DOGE) and Shiba Inu (SHIB) have been declining within a falling wedge pattern. However, technical analysis and derivatives data indicate a strong possibility of recovery in the coming days.
Dogecoin and Shiba Inu Follow Similar Paths
Dogecoin is up nearly 3% at the time of writing, trading at $0.1763. Overcoming Thursday’s nearly 10% drop, the meme coin is showing a bullish trend within a falling wedge pattern.
A resistance trendline, formed by peaks on May 23, May 25, and June 5, converges with a support trendline, connected by lows on May 20, May 31, and June 5, completing the wedge pattern.
The Relative Strength Index (RSI) at 32 is rising above the oversold zone on the 4-hour chart, making a higher low compared to the price lows of May 31 and June 5. This indicates a bullish divergence, increasing the chances of a reversal.
If the recovery gains momentum, Dogecoin needs to close above the upper trendline near the $0.1832 resistance level to overcome bearish control. Further up, a breakout rally could face resistance at the 50-day EMA at $0.1946, followed by the 200-day EMA at $0.2039.
However, a bearish continuation in DOGE could test the $0.1642 support level, the low from May 6.
Similarly, Shiba Inu is recovering by 3% to trade at $0.00001238 at the time of writing, following a 6.32% drop the previous day. The price action is fluctuating within a falling wedge formed by peaks on May 23, May 29, and June 5, and lows on May 13, May 19, and May 31.
The RSI indicator at 37 on the 4-hour chart supports the possibility of a bullish reversal in SHIB, as it emerges from the oversold zone with a higher low formation that diverges from the price drop between May 31 and June 5.
A bullish turn in the meme coin could challenge the upper trendline near $0.00001280 (Thursday’s opening price). In case of a breakout rally, the 50-day EMA at $0.00001306 and the 200-day EMA at $0.00001375 could serve as dynamic resistance.
Conversely, a bearish continuation could find support at the $0.00001159 level, the swing low formed on April 16.
Long Liquidations Subside for DOGE and SHIB
According to data, Dogecoin liquidations in the last 12 hours consist of $1.13 million in short liquidations and $183K in long liquidations. This reflects a short squeeze compared to the 24-hour liquidations, with $23.78 million in long liquidations and $3.42 million in short liquidations.
With the increased elimination of bullish traders, the number of short positions is rising, resulting in a long/short position ratio that falls to 0.9194. Meanwhile, the Open Interest (OI) is down 6.31% to $1.94 billion as traders exit the derivatives market.
Notably, the OI-weighted funding rate on DOGE has turned positive at 0.0006%, signaling an increase in bullish activity. Positive funding rates are paid by bulls to bears to keep exchange prices aligned with spot prices.
Similarly, Shiba Inu’s OI experienced an 11% drop to $143.26 million, while the OI-weighted funding rate turns positive at 0.0035%.
Liquidation data shows a drop in long liquidations from $718K in 24 hours to less than $800 in 12 hours. On the other hand, short liquidations remain significantly high at $14.85K in 12 hours, while the 24-hour liquidation stands at $50.69K.
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