Litecoin manages to break one line of resistance, only to be stopped by another. Will the bulls have enough to break the this latest resistance?
Let’s take a closer look at the LTC/USD H4 chart below (click to expand):
We can see how the red downwards trendline had been staying firm for a number of candles, being tested almost a dozen times since the end of March. The market finally broke this trendline during the weekend (marked in blue).
However, immediately after the break, there was actually drop to around 9.4, before jumping back up again. This drop, despite the break wasn’t unexpected, as I had envisaged this during my analysis on Sunday afternoon, where I mentioned,
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“I doubt 50% will be able to hold much longer, since the bears are still rather strong, especially for the short term. Therefore I expect price to reach the 61.8% Fib at 9.3 before long.”
Now, if we zoom out to the Daily timeframe, we’ll notice something interesting. Check out the D1 chart below (click to expand):
I want to focus on the pattern displayed by the Stochastic Oscillator (10,6,6). From the end of March until late last week, the Stochastics have been extremely oversold; in fact, they haven’t even come out of the 20 zone on a single occasion, with both the K and the D periods being virtually horizontal. When you get this kind of pattern on the Stochastics, it only means one thing – the trend is super strong, so it’s going to take a gargantuan effort by the bulls to stop this trend, and it would be wise to wait for a clear (in this case northern) trajectory for the Stoch lines to be established before contemplating going long.
Eventually this did happen, along with other corroborating technicals telling us a retrace was coming, however – the 38.2% Fib level at 13 may well be a sticky point (marked in red), since it’s a confluence of resistance lines, (i.e. 38.2% Fib and 13, a psychological whole number), although I do expect another test of this level in the short term.