After several days of indecisive movement, Dogecoin appears to be approaching a technical turning point. The cryptocurrency is currently trading near $0.17, with a slight 1.4% increase in the past 24 hours.

Technical analysis of the Dogecoin price chart shows that the meme coin is about to complete a classic head and shoulders pattern that would send it above $0.22 again. This comes as derivatives data shows that a break could trigger liquidations close to 1% of the $1.65 billion open interest in Dogecoin futures.

Head-And-Shoulders Formation Signals Break To Key Price Zone

According to an interesting technical analysis of the Dogecoin’s price chart, the meme coin is forming a classic inverse head and shoulders pattern on the daily timeframe. This pattern is composed of a well-defined left shoulder in early March, a deep head formed by early April lows, and a developing right shoulder that appears to be stabilizing towards the neckline as of early May. 

As shown on the chart below, the neckline of this inverse head and shoulders formation lies just above the $0.17 zone, particularly at the $0.1735 level. A successful break above this level could unlock millions in liquidations and would not only confirm the pattern but also clear the way for a larger breakout. 

The chart also shows the potential of an AB=CD harmonic pattern that aligns with Fibonacci extension levels projected from the $0.131 low on April 6. The measured move is a CD playout that will see Dogecoin rise toward the 0.618 to 0.786 retracement levels, corresponding to price targets in the $0.22 to $0.23 range. If this pattern plays out in sync with the head and shoulders structure, it would imply a 35% rally from the current price level.

$1.65 Billion Open Interest Heightens The Stakes For A Dogecoin Rally

What makes this scenario especially high-stakes is the massive amount of open interest in Dogecoin’s derivatives market. The $1.65 billion currently sitting in open positions suggests that even a modest price move can have a domino effect and a short squeeze. 

If the Dogecoin price pushes above $0.1735, it could trigger over $14 million in short liquidations, representing about 1% of the $1.65 billion open interest currently held in Dogecoin futures. It would also activate the neckline of the inverse head and shoulders, putting a much larger bullish structure in motion. 

Once the $0.18 resistance gives way, bulls could aim for the 0.618 Fibonacci level near $0.215 and ultimately the 0.786 level around $0.23. At this point, Dogecoin might face the next consolidation zone before bulls can target more upside to $0.35 and beyond.

At the time of writing, DOGE is trading at $0.1716, and the price point to watch is $0.1735.

Featured image from Getty Images, chart from Tradingview.com

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