Academy manager Dolan was appointed in the immediate aftermath of the sacking of Brian McDermott last week, with Reading 19th in the table.
A 1-0 defeat at league leaders Manchester United followed at the weekend but McCarthy, who returned to the bench at Old Trafford after a four-month injury lay-off, reckons Dolan can lead the Berkshire club to safety.
"He's got a great method to the way he works and he gets the boys going," he told the Reading Post.
"I think he's come in and he'll do a good job for us. We'll have to see how the games turn out, but I think he's got a great chance and all the lads are with him."