Litecoin continues to rally this week after rebounding from the 1.30 handle. The 1H chart shows some bullish signals.
1) Price is above the 200-, 100-, and 50-hour SMAs.
2) The RSI tagged 70, held above 40, and pushed above 70 again. This shows development of bullish momentum.
Despite these bullish signals, we should beware of a bull trap (when a bullish signal fails and buyers are trapped in a bearish market). One reason I believe this could be a bull trap is that price action despite the sharp swing during the April 30 session is still choppy. Basically, the 1H candles are still showing long tails to the upside, which shows a lack of commitment. The other reason is simple – the prevailing trend is bearish and there has not been an established price bottom yet.
Let’s take a look at the 4H chart
When we look at the 4H chart, you might say but wait, there was a long tail to the downside, why was┬áthat NOT be a bear-trap?
Well, price never recovered above the 4H candle that made that down spike earlier in April. This can not be said about the bullish 1H candles with upward spikes.
Also, with the prevailing trend being bearish, I would say that at most, we have a sideways market.┬áEven in the sideways market scenario, price is approaching key resistance, as the 4H RSI approaches 70 (overbought condition). As price tags 1.50, we should expect some resistance.
If price clears 1.50, we can expect some near-term bullish extension, but we should expect resistance soon, at most at the 1.55 support/resistance pivot.
Previous Post by Author: Litecoin Price Technical Analysis for 30/4/2015 ÔÇô Paint Drying