Technical Indicators Show Bearish Divergence as Holders Book Profits

• Dogecoin price is hovering around $0.40 on Thursday after recovering from a pullback earlier this week.
• The RSI shows a bearish divergence and the MACD suggests a sell signal.
• The NPL indicator shows DOGE holders taking profits on recent gains, increasing selling pressure.

Dogecoin (DOGE) price hovers around the $0.40 level on Thursday after recovering from an earlier pullback this week. The technical outlook suggests a downtrend for DOGE as the Relative Strength Index (RSI) shows a bearish divergence in the daily chart and the Moving Average Convergence Indicator (MACD) suggests a sell signal. Additionally, DOGE’s Network Profit/Loss (NPL) is seeing multiple spikes, indicating that holders are taking profits on recent gains and increasing selling pressure.

Dogecoin Poised for a Downturn as Momentum Indicators Show Bearish Divergence

Dogecoin price reached a new yearly high of $0.48 on November 23, but failed to close above the $0.44 resistance level. After that failure, it fell more than 10% over the next three days through Tuesday. However, it recovered slightly on Wednesday, and at the time of writing on Thursday, it is hovering around $0.403.

The RSI indicator suggests weak momentum in the daily chart. The Dogecoin price high formed on November 23 does not reflect the RSI high for the same period. This development is called bearish divergence, often leading to a trend reversal or short-term pullback. Additionally, the MACD indicator also showed a bearish crossover on Tuesday, suggesting a sell signal.

If DOGE’s decline continues, it could extend the decline to retest 61.80% Fibonacci retracement level, taken from the November 3 low of $0.142 to the November 23 high of $0.480, at $0.350, which roughly coincides with the daily support level.

DOGE/USDT daily chart

Looking down on memecoin’s on-chain metric further projects a bearish outlook. Santiment’s Network Realized Profit/Loss (NPL) indicator calculates a daily network-level return on investment (ROI) based on the coin’s on-chain trading volume. In simple terms, it is used to measure market distress. Large increases in a coin’s NPL indicate that its holders are, on average, selling their bags at a significant profit. On the other hand, sharp declines imply that holders of the coin are, on average, realizing losses, suggesting panic selling and investor capitulation.

In the case of DOGE, the metric has increased several times since Monday and reached its highest annual level on November 22. Similar spikes were seen in early April, after which the price of Dogecoin collapsed. If history repeats itself, DOGE could see a similar decline in the coming days.

Table of profits/losses made by the Dogecoin network. Source: Santiment