On Thursday, Litecoin (CRYPTO: LTC) was trading over 2% higher in another attempt to erase some of the losses brought on when El Salvador formally adopted Bitcoin (CRYPTO: BTC) as legal tender and the cryptocurrency market went into free fall.
Litecoin plummeted more than 26% lower on Tuesday but bounced and wicked from a support level near the $162 mark.
On Wednesday, the crypto consolidated the move and printed a long-legged doji candle, which indicates indecision.
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The Litecoin Chart: Litecoin’s relative strength index (RSI) had also reached an uncomfortable 75% on Sept. 5. An RSI over the 70% level puts a stock or crypto into overbought territory which is a sell signal for technical traders. When Litecoin’s RSI reached 74% between Aug. 13 and Aug. 15 the crypto retraced almost 14% over the two trading days that followed.
On Thursday, Litecoin’s trading range was completely within the trading range from Wednesday. When Litecoin tried to surpass Tuesday’s high-of-day, the crypto rejected and traded lower. This has set Litecoin into an inside bar pattern which indicates consolidation.
Litecoin began trading in an uptrend on July 21 after creating a double bottom pattern at the $103.88 level, making consistently higher highs and higher lows. On Aug. 16 the crypto then entered into a sideways trading pattern in consolidation before creating a triple bottom pattern at the $164.50 level, which propelled Litecoin up a resistance level at $232.
Litecoin is trading below the eight-day and 21-day exponential moving averages (EMAs), but the eight-day EMA is trending above the 21-day, which indicates indecision.
Litecoin will need to rise up above the $193 level to avoid causing the eight-day EMA to cross below the 21-day. Litecoin is trading slightly below the 200-day simple moving average, which indicates overall sentiment in the stock is bearish.
- Bulls want big bullish volume to come in and drive Litecoin back up above the EMAs and a resistance level at $193.80. If the crypto can regain the level as support, it has room to move up toward $208.23.
- Bears want to see Litecoin continue to reject the upper EMAs and for the crypto to fall back below the $176 level. If Litecoin loses the area as support, it could fall toward $162.93. If Litecoin is unable to regain the eight-day EMA as support it is possible the crypto is settling into a bear flag pattern which could cause the crypto to see further downside.
Image by Eivind Pedersen from Pixabay
