$766M Short Liquidations Pointing to a Dogecoin Price Reversal?

Dogecoin (DOGE) Price Reversal Imminent

Dogecoin (DOGE) has experienced increased trading activity characterized by a spike in net longs and slippage, indicating a potential reversal in price. These spikes have coincided with local price highs, followed by significant declines.

Initially, DOGE maintained stability after the first spike. However, subsequent spikes became more pronounced and preceded sharp falls, suggesting excessive buying enthusiasm (FOMO) leading to unsustainable prices.

The latest data shows a sharp decline following the most recent local high, with prices falling from $0.36 to below $0.32. This suggests that traders buying DOGE during these spikes may be purchasing at a peak and facing immediate losses.

If DOGE continues to exhibit spikes in net longs and slippage followed by declines, ongoing volatility and potential further downsides are likely.

Liquidation Heatmap Shows Risk for Short Positions

The DOGE Liquidation Heatmap indicates that if prices recover to $0.35, approximately $766.45 million in short positions could be liquidated. This surge in buying pressure could drive prices upward.

If Dogecoin reaches $0.35, the resulting short squeeze could propel prices even higher. However, failure to reach this trigger point may sustain the downtrend due to a lack of a catalyst for a rebound.

Bull-Flag Pattern Suggests Potential Reversal

The DOGE/USDT price action suggests a bull flag pattern, indicating a potential reversal near the current low of $0.28. The sell-side deviation at $0.35 shows where sellers gained the upper hand.

Despite bearish indicators, a bull flag typically suggests a continuation of the previous uptrend. However, volume support is crucial for an impending rise. Volume levels are currently low, potentially limiting the extent of any upward move.

If the bull flag fails to validate due to low volume, DOGE could see further declines. Conversely, a volume surge and a breakout above the flag pattern could target previous highs of $0.35.