Litecoin started the week mostly in a tight consolidation between roughly 1.45 and 1.50 as we can see in the 1H chart below.
Towards the end of the session, the price action of litecoin broke below the 1.45 low and dropped to 1.36 before stalling. Here are some other technical observations from the 1H chart:
1) The breakout is continuing an expected process of “chewing” a tail created by a downward spike last week that created a new low on the year around parity (1.00).
2) Price remains under the 200-, 100-, and 50-hour simple moving averages (SMAs), which are sloping down and in bearish alignment (meaning the 200- is above the 100-, which is above the 50-hour SMA).
3) The 1H RSI continues to hold under 60 while tagging below 30, which reflects persistent bearish momentum.
4) There was relatively stronger volatility during the break below the Sunday consolidation.
If price pulls back but holds under 1.45 for the most part, forgiving some intrasession violation, the downside risk remains intact towards the 1.00 low. At this point a break above 1.50 could neutralize the bearish outlook, especially if the 1H RSI also climbs back above 60. However, we should still limit the bullish outlook in this scenario.
In the 4H chart, we can see that the RSI has been tagging below 30 several times, reflecting strong and persistent bearish momentum, without much of a pullback since the RSI did not push back above even 40. Now, if price does break above 1.50, we can expect it to rise until 1.6001.62, where it will meet a previous support/resistance area as well as test the 50- and 100-period SMAs in the 4H chart. Alos, if the RSI pushes back towards the 50-60 area, a bearish market should limit further momentum upwards.
Now, if price breaks above 1.62, and the RSI pushes above 60, we might not have the “tail-chewing” scenario. Instead, the spike would then represent a “clcear-out” after which price would move in the opposite direction. Above 1.62, there is some common resistance around 1.72-1.73. Let’s limit our maximum bullish outlook in the short to medium-term to this 1.72-1.73 area. After all bears have been in charge since 2014 and there has not been any significant bullish correction except the one earlier this year from 1.10 up to 1.82. After that, volatility has subsided, but the downside risk remains in play.
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