Litecoin continues to consolidate. In the 1H chart below we see a sideways range roughly between 1.80-1.90.
Here are some observations:
1) The 200-, 100-, and 50-hour simple moving averages (SMAs) are clustered together. This reflects a market that not only has no direction, but has very low volatility.
2) Price has been whipping over and under the cluster of SMAs. This also reflects indecision, but we can already see that by looking at the sideways price action.
3) The RSI has tagged 30, but has been holding below 60 for the most part. This actually reflects a slightly bearish bias. This is because right before the price range, price fell from about 2.04.
Now what should we expect if there is a break out of the 1.80-1.90 range? Let’s take a look at the 4H chart.
The 4H chart above shows that the range in the 1H chart is actually a range within a larger range within another larger price range. Let’s go back to mid-January first. Price bounced off 1.10 to about 2.45. This sets the large price range for consolidation. Within this range we saw another range roughly between 1.70 and 2.04. Within that range, we saw the 1.80-1.90 range.
This type of consolidation is called coiling consolidation, which is similar to a triangle pattern – no direction, narrowing volatility. If volatility starts to pick up, and price action can confirm direction, then we have uncoiling.
Now, the initial break in these situations are very unreliable. So, let’s say price breaks below 1.80, we should want to see a rally fail to push above 185 to confirm the bearish breakout. Similarly, if there is a break above 1.90, we should wait until price falls back and shows respect around 185 or higher.
A bullish breakout with volatility can expose the 2.40-2.45 area, while a bearish break with volatility exposes the 1.10 low on the year.
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