However, as long as trading is held above the two support levels indicated by us below, the pair’s chances for further strengthening remain high.
Long-term bullish breakout
In early July, the Litecoin (LTC) rate made a bullish breakout of the downward resistance line, which lasted 889 days on the chart. As a result of this week’s decline, price has tested this line for strength as support, which is widespread after bullish breakouts.
Technical indicators are neutral, with a slight advantage towards bears. Before the current drawdown, the RSI gave signals of hidden bearish divergence, while the stochastic RSI was overbought and began to decline.
However, the pair is not giving any clear signals of a bearish reversal.
There are two support levels on the daily chart – at $47 and $40. At the time of writing the analysis, the price was trading directly in the area of the first level.
Technical indicators on the daily chart paint a picture that is the opposite of what we see on the weekly time frame. Both the RSI and MACD are at their lowest levels since the March collapse, while the stochastic RSI is oversold and is holding at the June levels that preceded the active rally phase.
In this regard, as long as the price is trading above any of the support levels we have identified, its chances of further growth will remain high.
After the pair formed a minimum on March 13, the results of the wave analysis do not give us clear signals. Perhaps the price has already completed the formation of a five-wave structure (black in the chart below) and is now correcting. Given the length of the previous bullish move, the correction could take several weeks.
An unusual point in this structure is the wavelength 1-2 versus waves 3-4-5, as well as the fact that the maximum trading volumes fell on the presumptive wave 5, which happens infrequently.
Another likely scenario is the formation of a wave pattern known as 1-2/1-2. In this case, after the formation of waves 1-2 (black), the 3rd wave was expanded and again consisting of waves 1-2 (orange).
This scenario will be neutralized in case of absorption of the low of the second wave from July 27 at $39.1.
Cryptocurrency trader @filbfilb shared an LTC/BTC chart on Twitter showing that the pair is trading near its historic lows.
The pair has indeed lost key support at ₿0.0057, which is now playing the role of resistance. Until the bulls in LTC manage to recover above this level, it will be impossible to talk about the bullish price dynamics.
If the pair succeeds in this, the current decline can be viewed as a price deviation beyond the lower border of the range.
Technical indicators are giving relatively bullish signals. The RSI signals a bullish divergence and the stochastic RSI has formed a bullish crossover.
MACD is growing, and although it is now forming a falling bar, there are still three days before the close of the week.
A recovery above the ₿0.0057 level will aim the market at ₿0.008.