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Litecoin “Headfake” Rally? LTC price technicals suggest a 65% crash

Published on

January 27, 2023
Read Time:2 Minute, 54 Second

Litecoin (LTC) has rallied 130% to close $100 after bottoming close to $40.50 in June 2022. Key causes embody total improved threat urge for food and euphoria surrounding the August 2023 Litecoin halving occasion.

Nevertheless, technicals recommend that LTC might erase most of these beneficial properties within the coming months.

LTC value paints an enormous bear flag

Litecoin will trim beneficial properties primarily as a result of an enormous bear flag on the weekly signal.

A bear flag is a bearish continuation sample that happens when value consolidates inside an ascending, parallel channel after a powerful downtrend. It resolves after the worth breaks beneath its decrease trendline with a rise in buying and selling quantity

Litecoin has been drawing an identical sample since early June 2022. Beforehand, the LTC/USD pair had seen a 70 % value correction from $130 to $40.50. So, from a technical perspective, if its value breaks beneath the decrease trendline, it might proceed its downtrend.

Weekly LTCUSD value chart with bear flag breakdown. Supply: TradingView

Usually, a bear flag breakdown transfer will trigger the worth to fall by the size of the earlier downtrend. Making use of the identical setup to Litecoin brings the bear flag draw back goal to virtually $30.50, or 65% beneath the present LTC value.

Litecoin Worth "Head Pretend"?

As talked about, Litecoin's value rally was primarily according to related strikes within the threat market as a result of cooling inflation.

For instance, the Nasdaq-100 inventory market index is up round 15.50% between October 2022 and January 2023. Equally, Bitcoin (BTC) has gained greater than 50% since its November 2022 low of round $15,500.

The weekly correlation coefficient between Litecoin and Nasdaq-100 was principally optimistic at 0.35 on Jan. 27. Likewise, the correlation between Litecoin and Bitcoin is now round 0.21.

Litecoin's weekly correlation coefficient with Nasdaq-100 and Bitcoin. Supply: TradingView

However many analysts, together with Mark Haefele, chief funding officer at UBS World Wealth Administration, have written down that the continuing risk-on rally might be a "head faux". In easy phrases, the continuing Litecoin rally could also be short-lived beneath the affect of its risk-taking counterparts.

Additionally, Crypto impartial market analyst Capo agreesbeneath observe:

“The best way the transfer up is going on, the way in which [higher-timeframe] Resistors being examined...it clearly seems rigged, no actual demand. As soon as once more the most important cop entice I've ever seen."

Bullish state of affairs for Litecoin

Nevertheless, not everyone seems to be pessimistic about dangerous property like Litcoin. Fashionable market analyst Rekt Capital sees Litecoin is rallying in the direction of $160 within the coming weeks, quoting a month-to-month chart configuration as proven beneath.

Month-to-month LTC/USD value chart. Supply: TradingView

Notably, the chart reveals that the worth of LTC is present process a powerful restoration transfer after testing a multi-year ascending trendline resistance throughout the $40-$50 vary, which helps it for additional uptrend in the direction of the $120-$160 vary. {dollars} might qualify.

These upside targets beforehand acted as helps and resistances. Due to this fact, breaking this key resistance might invalidate the bear flag setup, which is reported to occur 54% of the time research by veteran investor Tom Bulkowski.

This text doesn't include any funding recommendation or advice. Each funding and buying and selling transfer entails threat and readers ought to do their very own analysis when making a choice.



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Azeez Mustafa
Azeez began his FinTech career path in 2008 after growing interest and intrigue about market wizards and how they managed to become victorious on the battlefield of the financial world. After a decade of learning, reading and training the ins and outs of the industry, he’s now a sought after trading professional, technical/currency analyst and funds manager – as well as an author.
Last Updated : January 27, 2023
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