Litecoin is trading 0.31% or $0.014 down at $4.536 as selling pressure increases. While the price sustains above the support provided by $4.100, it may seem that a base may have been hit, but before establishing that we must take into consideration what the technical indicators are conveying. And I think they are pointing towards what was discussed in my previous analysis titled This May Turn Real Ugly!
Litecoin Chart Structure – Litecoin has been repeatedly testing the support line but has failed at achieving a higher high on the rebound. The cryptocurrency is witnessing what is aptly called a “relief rally” even as the trend remains down.
Moving Average Convergence Divergence – Among the big negatives, first is MACD. As can be seen from the daily LTC-USD chart above, MACD continues to fall while the Signal Line holds. The latest MACD, Signal Line and Histogram values are 0.5306, 0.7497 and -0.2191 respectively.
Momentum – Another indicator which coerces me to think that the current consolidation may well be a trap is the Momentum indicator. The Momentum indicator has swiftly accelerated on the downside and given up all the gains. From a value of 0.4498, the indicator has nosedived to -0.4138.
Money Flow Index – The MFI offers no respite either. From yesterday’s observation of 47.0012, the reading has declined to 46.6477.
Relative Strength Index – The 14-4h RSI value of 52.8376 reflects the ongoing consolidation but fails to offer any crucial insight into the future price action.
The above technical factors point to the lingering weakness in Litecoin. Market participants can either choose to create short positions when the breakdown happens (low-risk option) or to create long positions when the price nears $4.100 by keeping a strict stop-loss just south of $4.000 (high-risk option) for a target of $4.500.
Following the stop-losses will be of immense help in the current scenario. Expect volatility to pick up in the coming sessions.