In our last Dogecoin analysis, we discussed how DOGE was accumulating liquidity on both sides—above and below.

But what does that mean exactly? If you’re new to my analysis, let me break it down.

Understanding Liquidity and Why It Matters

Liquidity is what moves the market. It’s the fuel that powers price action. In simple terms, liquidity is the collection of stop-loss orders and pending buy or sell orders placed by traders at specific price levels. It’s also defined by the market depth—the volume of orders at each price point.

When we say price accumulates liquidity on both sides, it means that we have key resistance zones where sellers are waiting to pounce, and key demand zones where buyers are prepared to step in.

These zones are typically areas where price has encountered resistance in the past, or where a large volume of stop-loss orders or pending orders have been placed.

Now, when there’s a big move to grab that liquidity—either in a strong rally or a strong selloff—it creates imbalance. This imbalance, in turn, leads to a natural reaction as the market tries to regain equilibrium.

In our last analysis, we were examining a key supply zone at around $0.70, where we anticipated a potential reaction from sellers. However, instead of reacting at that level, DOGE continued its ascent to reach an even higher extreme H2 supply zone at around $0.78.

This was a significant development because this H2 zone was the point of origin for a strong downward move that had previously left behind an imbalance—specifically, a gap in price action. Typically, gaps get filled in an impulsive wave before a trend continues.

Dogecoin’s Current Price Action

As we monitor DOGE’s price action, we can see it now retracing downward from the H2 supply zone, and it’s approaching the liquidity on the other side—the demand zones.

In the chart below, we can identify two main key demand zones on the M30 timeframe that could trigger a reaction from buyers.

If we zoom into lower timeframes, we might observe a structural shift on the M1, M3, or M5, which would provide an even stronger confirmation of a potential bounce.

If you’re planning to enter a trade directly at one of these demand zones, then it’s crucial to manage your risk. Set your stop-loss order as soon as you see the first sign of a potential reaction.

If you prefer to keep an optimal risk to reward, then you might want to wait for the candle to fully close and open a position on the next candle with a lower entry.

Of course, the market can move in unexpected ways, and these are just possible scenarios. Nothing is ever 100% certain in the world of trading. Always trade smart and manage your risk.