Analysis provided by Ashton Fraser, learn more about his trading strategies with the forex reversal indicator.
After continuing to rise throughout yesterday, Litecoin takes a plunge this morning.
Let’s take a closer look at two separate LTC/USD charts to get a clearer idea of what’s going on and the reasons behind such price action.
Firstly, I’ve shown below a four hour chart (click to expand).
If we perform the Fibonacci study from the previous major swing high on the 4th of March at 18.76, to the last major swing low on the 9th of March at around the 15 price mark, we can see how price reached the 161.8% Fibonacci extension this morning, virtually to the very pip at around 21, before bouncing back down. Fibonacci extensions are often where traders exit their trades to cash in their profits, and that’s exactly what happened here.
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However, that’s not the only reason…
Since, if we zoom out to the Daily timeframe (as can be seen below), and perform a Fib study from the high of this year on the 6th of January at exactly 31.500, until the low of this year on the 25th of February at around 10.55, we’ll see that the price mark of 21, was another important level , this time the 50% level on the daily timeframe (click on chart to expand):
So we have two hugely important levels by way of performing some Fibonacci studies, and when such Fibs confluence like this, it means that level is going to be of great significance. Which of course it was – since price has reacted massively to this zone, bouncing down with great vigour.
As I type this, price is continuing to fall, and with other technical indicators implying that the momentum of the bears is still strong, we could see further falls throughout the day.
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