Yesterday’s turnaround in the Litecoin price saw it trade to our first upside target of $222. LTC has since dropped -6.5% to $207.80. What happens now?
LTC followed the market lower on Wednesday, sliding through two major trend lines. The subsequent bounce yesterday saw Litecoin recover the first trend line at $150. In today’s action, the price is currently attempting to clear the second.
Presently, the Litecoin price is struggling to find a catalyst to push it above the important barrier. The resulting failure still leaves the price stuck between the two important lines.
The lower trend line at $150 has been in place since October 2020. And until yesterday, had never been crossed.
The higher of the two is now situated at $225. This previous level of support is now a resistance level. The Litecoin price will need to clear this line convincingly to make further gains.
It’s quite possible that the recent rally was a knee-jerk reaction to the previous day’s decline. The huge trading volumes on Wednesday suggest that a large amount of liquidation had taken place.
Therefore, it’s logical to assume that yesterday’s dip-buying would run into less supply on the way up. This may have contributed to the magnitude of the 80% bounce from the $125 low.
The trading volume over the last 24 hours was much lower than the previous day. The only uptick in volume came as the price attempted to break back above the trend line at $222.
This gives us a good indication as to where the selling supply is.
If the price fails to clear this line today, the chances of it reversing lower are increased. This would then leave LTC vulnerable to an extension back to the support of the longer term trend, now at $151.
A close above the resistance changes things entirely. If the rally can continue and find enough buyers to absorb the supply at $225, things may start to get interesting.
I would then expect the momentum to take the price materially higher, on the basis that many longs have already liquidated their position.
However, until that happens, the price is likely to struggle. We will know more when the U.S trading day starts in a few hours.
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