An analyst has explained how Dogecoin could witness a rally of around 6,770% if this pattern continues for the meme coin.
Dogecoin is trading within a long-term ascending channel
In a new after On The pattern in question is the rising parallel channel from technical analysis.
A parallel channel refers to a consolidation pattern that occurs when the price of an asset moves within two parallel trend lines. The top line is made by connecting consecutive tops, while the bottom one connects the bottoms.
As long as the asset is within the channel, it will likely encounter resistance on the upper line and support on the lower line. A breakout of any of these levels could mean a continuation of the trend in that direction.
There are three types of parallel channels: channels parallel to the time axis, channels with a positive slope, and channels with a negative slope. The first type does not have a specific name, the last two do; they are known as the ascending and descending parallel channels respectively.
Given that these two types have sloping trend lines, they correspond to phases of consolidation in the asset that play out either up or down. It appears that Dogecoin has been traveling within such a pattern for the past decade, as evidenced by the chart shared by the analyst.
The chart shows that Dogecoin’s 1-week price has been stuck within this ascending parallel channel throughout its history. The most recent retest came just earlier in the year, when DOGE noted a recovery in profits.
As Martinez highlighted in the chart, DOGE’s current trajectory is reminiscent of the trend seen during the last two bull cycles. In each of these bull runs, the cryptocurrency had an initial upward burst, followed by a small decline that led to the actual bull rally.
In recent weeks, Dogecoin has fallen in value, perhaps indicating that it is currently in that phase of decline. Judging from what happened next in recent cycles, it is possible that the meme coin could soon start a rally that would top out at the upper level of the Ascending Channel.
Based on how far away the channel high is currently, the analyst noted that Dogecoin would need a 6,770% rally to get there. It now remains to be seen if the Ascending Channel would continue to hold its own for the meme coin and if something similar to history would happen this time as well.
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At the time of writing, Dogecoin is hovering around $0.32, up over 2% in the past seven days.
