Dogecoin (DOGE) has surged nearly 100% quarter-to-date (QTD) on hopes that Elon Musk would integrate the token onto the Twitter platform. However, DOGE's potential to continue its uptrend in the coming weeks is low, one popular market analyst argues.
Short Dogecoin hard?
Independent market analyst GCR said he is moderately short on DOGE based on its price's recent reaction to a Musk tweet. Notably, DOGE formed a local top at $0.158 on Nov. 1. The same day, Musk shared a picture of his pet Shiba Inu wearing a t-shirt with the Twitter logo.
— Elon Musk (@elonmusk) November 1, 2022
GCR argues that the Musk-effect is wearing off when it comes to Dogecoin's potential integration into Twitter, meaning that most of the gains are already priced in. Therefore, if the actual integration happens, it will likely become a sell-the-news event.
dog stock only has 2 bullets
bullet 1 – musk tweeting/teasing about integration; already fired
bullet 2 – official integration into twitter; hasn't shot, but would be sell the news
i'm moderate short on doggo, but leaving room open to short harder if they fire 2nd bullet
— GCR (@GCRClassic) November 3, 2022
Overbought correction begins
Meanwhile, Dogecoin continued its correction move on Nov. 4, three days after topping out at $0.158.
DOGE's price dropped to as low as $0.115 on Nov. 4, in part due to rumors of Twitter pausing its crypto wallet development project. That brought the token's net percentage correction from the Nov. 1 local top to nearly 27%.
In addition, the downside move surfaced due to its extremely overbought conditions with the highest relative strength index (RSI) since April 2021.
The correction has prompted Dogecoin price to retest its December 2021-May 2022 support (defined by the $0.108-$0.124 range; the red bar in the chart above) for a potential pullback. The coin may reach $0.185, a level coinciding with its 0.236 Fib line, if the recovery occurs.
Conversely, a break below the $0.108-$0.124 range could have DOGE drop to $0.055 as their primary downside target, down 55% from current price levels.
DOGE on-chain data
Furthermore, Dogecoin's on-chain data reveals a consistent drop in key metrics entering November, which could add more sell-pressure.
For instance, DOGE's Twitter-led price rally coincided with a sharp rise in whale transaction count (worth over $100,000), suggesting that they supported the upside move. But after Nov. 1, fewer whales have interacted with the Dogecoin network.
Meanwhile, the Dogecoin supply distribution across addresses holding between 1,000 and 10 million DOGE tokens has fallen alongside the price. Conversely, the supply controlled by addresses holding more than 10 million DOGE tokens has increased modestly.
In addition, the addresses holding below 100 DOGE have been increasing, hinting that retail investors have been offsetting whales' selling pressure to a certain degree.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.