Dogecoin Shows Overbought Signals, Will It Break Through the $0.1160 Resistance and Continue Its Rally?

▲ Dogecoin (DOGE)/ChatGPT generated image ©

Dogecoin (DOGE), the leading memecoin, is continuing its short-term surge and attempting to break through a key resistance level. However, a combination of weakening investor sentiment in the derivatives market and overbought signals is raising concerns about a trend reversal.

According to investment media FXStreet on May 5 (local time), Dogecoin surpassed $0.1100 on Tuesday, extending its approximately 10% gain since last week. Despite overall market sentiment improvement, the derivatives market is losing individual investor confidence, and technical indicators are pointing to an overbought state, suggesting a risk of downward reversal, thus a cautious bullish outlook prevails.

Decreased demand in the derivatives market clearly indicates a decline in investor risk appetite. According to CoinGlass data, Dogecoin futures' Open Interest decreased by over 4% in the last 24 hours, reaching $1.69 billion. This means that the nominal value of outstanding contracts remaining in the market has decreased.

Furthermore, the Open Interest weighted funding rate also sharply dropped from Monday's high of 0.0043% to 0.0019%. This decline in indicators confirms a significant decrease in interest from bullish investors looking to maintain long positions.

From a technical perspective, Dogecoin is currently trading near $0.1115, maintaining a short-term upward bias. Surpassing the 50-day Exponential Moving Average (EMA) of $0.0993 indicates improved underlying demand, but caution is advised as the Relative Strength Index (RSI) is at 76, indicating an overbought condition. The upward momentum shown by the Moving Average Convergence Divergence (MACD) is likely to face a consolidation phase or a correctional period before testing further resistance levels.

On the upside, the supply zone at $0.1160, tested on February 15, acts as the next major resistance level and a key indicator for breaking out of the long-term downtrend. If this zone is breached, it could target the 200-day EMA at $0.1254. Conversely, on the downside, the psychological support level of $0.1000 serves as the primary defense line. In case of a deeper correction, the 50-day EMA at $0.0993 is positioned as a strong technical support level where buying interest is expected to regroup.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. This content should be interpreted for informational purposes only.*