LTC/USD Technical Analysis – 25th Feb 2014

Analysis provided by Ashton Fraser, learn more about his Forex Reversals trading strategies.

Litecoin fell this morning from a high of 15.0, a psychological whole number - I mentioned in yesterday's analysis that this figure was going to be very important, and so it proved.

Let's take a look at the M30 LTC/USD chart below (click to expand).

We can see during the time price was hovering around 15.0, there was a Bollinger Squeeze in process. Look how tight the bands were together. And so it happened the squeeze came to an end, when price fell like a rock this morning, much like it's older brother Bitcoin , hitting a low of 10.7 around 6am GMT.

Then we saw price rise all the way to the 61.8% Fibonacci retracement level. However, take a look at the candle I've circled in blue. It's interesting to note that it's a very bullish candle, with minimum wicks, it's body larger than the Average True Range, and most of it's body is contained below the lower Bollinger line. Classic potential reversal pattern. At the same time the Stochastics had crossed upwards whilst being underbought. With the Accelerator Oscillator turning green on the next candle, it wasn't a surpise that price hit the 61.6% Fib.

However,lets rewind a few hours and zoom out to the hourly chart, and all will become clear as to the exact reason for the strong bounce at exactly 10.7. It didn't bounce of 10.7 for any random reason. Oh no. Despite the crazy nature of digital currencies, there is almost always some underlying rules behind any apparent randomness. The market is not random. Take a look at the chart below (click to expand).

A picture paints a thousand words. Look at how price has reacted that white trendline exactly to the pip. This is a very strong trendline, and it's only re-inforced by today's bounce at 10.7. Keep an eye out for this line in the future.