Litecoin has been heading down since the 20th of this month, initiated by some strong bearish candlestick price action, but that might be about to change.
Let’s take a closer look at the latest LTC/USD H4 chart below (click to expand):
I’ve performed the Fibonacci study from the weekend swing low at 11.42, until the high of this week at 12.98 (essentially 13).
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Firstly, focusing on the reasons for the initial downtrend from the high of 12.98 on the 20th, there are two main candles responsible for the fall, circled in red. As you can see, they both had long upper wicks, much longer than their bodies, with negligible lower wicks, meaning they can be classified as shooting stars. What’s more, both of them tested 13.0, but the resistance here held firm, proving once again the powerful nature of psychological whole numbers.
So we have powerful reversal candlestick patterns with a strong psychological resistance – plus on the second candle, the Accelerator Oscillator turned red. Other technicals provided further corroboration; including Stochastics bearing south from overbought territory and the Awesome Oscillator turning red, meaning overall this was a potent reversal, and consequently, price fell quite a distance, reaching the 78.6% Fibonacci retracement level at 11.8 (marked in blue), as I had predicted in my last analysis on Monday,
“I wouldn’t be surprised to a see a drop down to 11.8 later this week.”
Since the testing of 78.6% however, we’ve seen some consolidation, with all four following candles forming spinning tops – classic ranging in action. Could this signify a potential bullish reversal? Quite possibly, because in conjunction to this latest price action, we also have the Stochastics now crossing north from an oversold position, along with the AC turning green.
Whether this means we’re going to see bulls take over is hard to say, but at the very least, I’m confident of price testing 61.8% at 12.0. If it does break this however, then we could see bulls take hold for the short term at least.