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Dogecoin course (DOGE) is heading for a violent crash, the Musk effect fizzles out

 


Dogecoin ( DOGE ) has made a noticeable jump this week after Tesla CEO Elon Musk announced plans to buy influential social network Twitter. But just as quickly as the dreams of this takeover were shattered, the renewed hype surrounding the DOGE was over.


While the Dogecoin price is still expected to close with an 8% gain for the week, it is down to $0.142 as of today, April 17th. An interim high of $0.149 was recorded three days earlier. While this downturn is relatively modest, there is still reason for investors to panic as the price action over the past few days is completing a pattern that has an 85% probability of a new downturn.


The so-called “ head and shoulders pattern ” consists of three consecutive high points, arranged like a head between two shoulders. Accordingly, the middle high (head) sticks out the most, while the two shoulders are slightly lower and about the same height.


All three high points also share a level of support on the underside called the "throat area". In this negative price pattern, the third high is usually followed by a drop below that same neckline that is about as strong as the head's maximum height.


Since March 24th, the Dogecoin price has been forming such a pattern, which is why a pulldown towards the neck area is next ahead after completing the right shoulder this week. If the DOGE then slips below the "neckline" as expected, a crash down to the lower trend line could follow (see price chart).


The first dip down to the neckline at $0.132, which is 7.5% below the current Dogecoin price, is the most likely to begin with. This mark coincides quite exactly with the 50-day simple moving average (50-day SMA, blue line), which is why the support is a bit stronger.


If these supports are broken nonetheless, the head-and-shoulders pattern will be confirmed definitively, with the price target then being down to just $1, which would mean a 30% crash for the DOGE compared to current levels.


Interestingly, this price target is again near the lower trendline of the descending channel that has been framing the Dogecoin price since December.

Irrespective of this, the price jump of the last few days makes it clear that Tesla boss Elon Musk still has a direct influence on the DOGE, even if its effect is now fizzled out.


After it was announced on April 4 that Musk had acquired a 9.2% stake in the social network Twitter, the Dogecoin price initially rose by more than 20%. The high of $0.174 was also the best level in three months.


The crypto investors then booked partial profits and thus pushed the price down again, but when Musk announced a few days ago that he wanted to take over the social medium completely, the joke cryptocurrency promptly went up again.


This shows that the so-called " Musk Effect ", which Hamburg researchers demonstrated last February, is still working and brings a noticeable boost for the Dogecoin every time. Robinhood CEO Vlad Tenev also did his best this week to give DOGE a helping hand by citing its potential to become the "currency of the internet."

Elon Musk seems to support this reading, as the successful entrepreneur recently suggested that Twitter should introduce the Dogecoin as a means of payment for its own subscription service.

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