The price of the Pepe token has risen for two consecutive days in a high-volume environment as traders bought on dips.
Pepe price recovers
Pepe (PEPE), the third-largest meme coin, traded at $0.0000081 on Wednesday, up over 38% from its lowest price on Monday, when stocks and most cryptocurrencies fell by double digits.
Its price performance mirrored that of other tokens such as Stacks (STX), Bonk, and Solana (SOL), all of which have formed a hammer pattern, one of the most popular reversal signs in the market.
Pepe had the highest volume of any meme coin, rising to over $1.43 billion, more than Dogecoin (DOGE) at $1.03 billion and Shiba Inu (SHIB) at $356 million.
However, Pepe’s recovery comes with some key risks. First, it is happening in an environment of low futures open interest. Interest was only $71 million, down from July’s peak of over $141 million.
Secondly, the token has formed some bearish chart patterns that could hamper its recovery. The most important of these is the head and shoulders pattern. It recently fell from the right shoulder level at $0.000013 and crossed above the sloping neckline at $0.0000066.
Therefore, if the current recovery turns out to be short-lived or a dead-cat bounce, there is a risk that Pepe could fall to as low as $0.0000020, which is about 75% below its Wednesday level. This level was selected by measuring the distance between the head and neckline.
Pepe token invalidated 5th Elliot wave phase
Meanwhile, Pepe likely invalidated the Impulse Elliot Wave pattern as it failed to complete the bullish fifth leg.
The other potential risk is the one previously identified with Bitcoin, where a death cross pattern could form, a clear bearish sign.
Finally, Pepe remains below the 50-day and 100-day moving averages, which recently formed a bearish crossover pattern. Therefore, the token is likely to resume the downtrend and possibly retest this week’s low of $0.0000058. A break below this level will indicate further downside.
