In my previous analysis, Hold on, Traders!, I had discussed that Litecoin must be shorted and that market participants should expect some good action this week! As can be seen, Litecoin has slumped more than 10% in the past 24 hours as bulls failed to breach the resistance posed by the downward sloping trendline.
Litecoin is now trading down 10.13% at $2.670.
My downside target for this short recommendation was $2.600, but this rapid decline has pushed Litecoin into the oversold zone and hence, short covering cannot be ruled out.
Litecoin Chart Structure – The fall has pushed the price below the previous closing level of $2.700 (see the 240-minute LTC-USD price chart above), which is a big negative for Litecoin. If the cryptocurrency sustains below this level on a prolonged basis, more losses will be seen.
Moving Average Convergence Divergence – The MACD and the Signal Line are accelerating downwards, in conjunction with the price collapse. The latest MACD, Signal Line and Histogram values are -0.0407, 0.0086 and -0.0493 respectively.
Momentum – The Momentum reading has dropped to the lowest level in a week. The reading has plummeted to -0.3093.
Relative Strength Index – Litecoin’s oversold condition is easily confirmed by the 14-4h RSI reading of 29.0271.
Conclusion: Book Profits in Short Positions!
Since the decline has pulled the price near to its crucial support of $2.600, market participants are advised to book profits in their short positions. Since the huge gains have come in a short time, traders may be looking to lock in their profits which may lead to a price rise. Also, the oversold condition of Litecoin may cause some speculative buying to emerge and keep the price afloat. Get out of your short positions, wait for a price rise to create fresh shorts and maintain a stop-loss to minimize the risks.