Litecoin has soared more than 6% since yesterday to $3.909 on account of short covering as the cryptocurrency enters into consolidation mode. The rise has brought the price closer to the resistance level of $4.100.
I had mentioned in my previous analysis No Relief Seen! that the market participants should not confuse the ongoing sideways action with a base formation. It must be noted that only above the resistance line will a base be confirmed, but until then, chances are that it remains in a lower top, lower bottom structure.
Technical analysis of the daily LTC-USD price chart tells that the bulls need to make a stronger comeback if the downtrend is to be reversed.
Litecoin Chart Structure – After breaking through $4.100, Litecoin has done well to maintain its sideways movement. As can be seen, the cryptocurrency has retested the breached support at least once and is now on course to challenge it again.
Moving Average Convergence Divergence – MACD remains flat to negative even during such a strong rise; the value has depreciated from 0.0958 to 0.0852. The Signal Line has also witnessed a cut in its value, it is now at 0.3335.
Momentum – One factor that is favoring the bulls is the rebound in the Momentum indicator readings. On a rise for the second day, the latest Momentum value is -0.3710.
Money Flow Index – The MFI is flat-lined at 38.9899.
Relative Strength Index – The underlying strength continues to remain on the weaker side, which is depicted by the latest RSI value of 48.9089.
Litecoin’s price advance should be seen as a selling opportunity until convincing buy signals emerge. Owing to the highly volatile nature of the cryptocurrency, market participants should place a deep stop-loss just north of $4.280 (intraday) when the price approaches the resistance zone.