As was expressed in Danger Looms, Litecoin witnessed a strong selloff intraday, crashing by a little more than 20%. I expected the cryptocurrency to hit $3.100 but the price reversed from $3.180. Yesterday marked the fourth straight day of losses for Litecoin.
Currently, Litecoin is trading with a deep cut of 6.33% since yesterday’s observation.
From a technical perspective, it looks like Litecoin will continue to devalue against the US dollar and hence, rebounds should be used to go short in the counter.
Litecoin Chart Structure – After breaching the crucial support of $4.100, the cryptocurrency succumbed under selling pressure to $3.180. Now, even while the price trades significantly above from the lows, I feel that the damage has been done and Litecoin will head further lower in the coming sessions.
Moving Average Convergence Divergence – Histogram losses have widened to -0.3591 while the MACD and the Signal Line have values of 0.2899 and 0.6490 respectively.
Momentum – The Momentum indicator reflects the underlying bearishness with a value of -1.4420.
Money Flow Index – The MFI has declined for the fifth consecutive day; it is currently down to 40.9027.
Relative Strength Index – The strength reading has slumped to a new monthly low of 47.0011.
My expected short-term target for Litecoin was almost reached yesterday, so I would not rule out a rebound. However, I do believe that relief rallies will be met with renewed selling pressure and hence, I would advise the market participants to create short positions when the price advances to near the resistance level of $4.100. Stop-loss (closing basis) can be placed just above the resistance. The sentiment has been severely hit.
It is hard to see any positive trigger for the cryptocurrency which may take lead to a trend reversal. It is not worth the risk to initiate long positions at current levels.