After hitting a high of $4.85, Litecoin price dropped earlier today to print a low of $4.20 on Bitfinex. As we predicted during yesterday’s analysis, price correction is attempting to pull down the price, yet it is well supported above the $3.62 level which corresponds to the 0.618 retracement level according to the Fibonacci retracement we plotted. (Read yesterday’s Litecoin analysis here).
A Head and Shoulders Pattern on the 1 Hour Charts:
By studying the 1 hour (LTC/USD) charts from Bitfinex (look at the below chart) and plotting the 20, 50 and 100 EMAs, we can observe the following:
- The price is still above the 20, 50 and 100 EMAs during most of the trading sessions and has only fallen below the 20 EMA during only 2 sessions since yesterday.
- Since the bullish wave started on the 29th of October, we can see a “head and 2 shoulders” pattern forming; so according to the below chart, the left shoulder and head have already been formed, yet we still expect to see the right shoulder form another price surge followed by a downwards price correction attempt.
Overbought Market:
By examining the 1 day (LTC/USD) charts from Bitfinex (look at the below chart); plotting the 20, 50 and EMAs; and executing the Relative Strength Index (RSI), we can conclude the following.
- Litecoin is now overbought as shown by an RSI value of 80 (> 70) and an upwards sloping RSI curve. The overbought market is the reason why the price started dropping after yesterday’s highs.
- Litecoin price is trading at a level that is higher than the 20,50 and 100 EMAs, so we can see another price surge after the price correction stage is over.
Conclusion:
Litecoin price is now dropping as the price correction wave is attempting to bring balance to the current overbought market; however, we are still expecting another bullish wave that will be notable after the price correction attempt is over.
Charts from Bitfinex; hosted by Tradingview.com
