Litecoin at End of Clear Breakout Pattern, as Volume Drops Off - Price Analysis

  • Short term: we should watch for a potential break to the upside, or failure to downside
  • Long term: trend is very much down, with a lot of work to do before reversal

Litecoin (LTC), a leading altcoin, has now seen five consecutive months of loss on its LTC/BTC pairing. This is pretty exceptional, and a downtrend in sell volume may suggest an end to that violent selloff soon. And while finding bottoms is always a messy affair, if Litecoin doesn’t do soon, it will find itself breaking through into prices not seen in years.

Starting with the weekly, we must note that Litecoin’s weekly candle has closed just below an important support band, which marked the bottom of the bearish 2018 market. In general, there are a lot of red candles here, and we see a falling wedge pattern which suggests (vaguely - it’s a “meme pattern”) a breakout could result at some point soon.

Close below important supportLTC chart by TradingView

We don’t see very exuberant buying at last week’s candle close, with a small buy wick and a slight volume bump. However, volume is generally falling during this months-long selloff, which - along with the falling wedge - implies that perhaps selling is coming to its end.

If we look at the monthly candle, which also closed recently, we see a stark red candle that is almost all body. July’s monthly close implied that strong buy support had come into Litecoin, but this thesis clearly didn’t pan out as the leading altcoin broke straight down through the critical support.

Vol fell despite deep sellingLTC chart by TradingView

Again, however, we see that sell volume on this very red candle did in fact diminish even as price fell. This implies that many of the sellers got out here, and could suggest a stabilization during the coming month(s).

With the long term charts out of the way, we turn to a shorter timeframe. On the 12-hour, we see a large bull divergence forming, after one that didn’t pan out. Buy volume is shrinking down to nothing as this obvious pattern comes to an end, suggesting the end of a consolidation phase and possible movement soon.

Bull div, could break upLTC chart by TradingView

The MACD had looked primed to cross up, after a fakeout to the downside, but is lingering at the crossing point without actually doing so; and the histogram is ticking back down, too, but has recently spent a lot of time on the positive side. A healthy buy wick on August 28 was perhaps enough of a signal of support to give LTC another chance to break out - correctly so to speak - to the upside of this bullish pattern.

Litecoin has been searching for a bottom against BTC for quite some time. Many sellers seem to have been shaken out already, owing to the diminishing volume which is mostly selling. There are a lot of red weekly candles stacked one atop the other, too - it may be time for some relief, if not a real bottom, and the falling wedge that has formed is the obvious time for it to happen.

If it doesn’t, Litecoin will join Ethereum (ETH) in a real capitulation to lows not seen since 2017.

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