Even as valuation gets richer and technical indicators sound a warning, Litecoin continues to defy gravity as it closed yesterday at the highest level of the year – $3.063. Speculative buying has lifted the price even higher today, to $3.085.
However, the rally is not an opportunity to enter into the highly overbought, technically weak cryptocurrency.
Technical considerations derived from the 240-minute LTC-USD price chart have been given below.
Litecoin Chart Structure – After hitting the yearly high of $3.194, Litecoin consolidated for a brief period. With yesterday’s closing, bulls have clearly stated that they remain in complete control of the situation. Volume remains satisfactory.
Moving Average Convergence Divergence – Ever since the price hit $3.194, the Histogram began its downtrend (look at the pink bars decreasing in the chart above) – a strong sign of weakness. The MACD indicator settled at a higher level while the Signal Line added to gains. Finally, the MACD indicator closed below the Signal Line, pressing the Histogram into the negative region. MACD currently has a value of 0.2631, Signal Line has 0.2762 while the Histogram has -0.0131.
Momentum – An observation similar to Histogram has been observed in Momentum indicator. The value has dropped from above 1 (when the price topped) to 0.0206 now.
Relative Strength Index – The RSI indicator, with a reading of 74.4791 confirms my view that Litecoin is indeed expensive.
Speculative buying is sustaining the higher valuation of Litecoin. I believe that intelligent traders will wait for a correction before going long in the counter. I would not recommend shorting at current levels because it cannot be said for sure how high the price will go before the market realizes its folly. Litecoin is extremely overbought from a near-term perspective, and market participants should only take convincing technical signals into account before making a trade.