Crypto Price Analysis: Litecoin Showing Parabolic Potential

On our January 9, 2019 Litecoin update, we told our readers that Litecoin (LTC/BTC) was a solid buy on dips. Back then, the market was showing signs of short-term weakness, which is why we expected a pullback. Nevertheless, we were confident that the quick retracement will catapult the market into bull territory. Our targets back then were 0.0013 and 0.0015.

If you bought the dip, you would be up by over 50% as Litecoin is already above the initial target of 0.0013. For those who did not get in, don’t worry because you’ll have your chance to do so in the next few weeks. The writings on the wall tell us that Litecoin is just getting started.

In this article, we explore how Litecoin is showing parabolic potential

Strong Bullish Breakouts

When an asset goes parabolic, its value exponentially rises over a short period of time. For example, on October 31, 2018, we wrote that ChainLink (LINK/BTC) was showing parabolic potential. At the time, it broke out of an inverse head and shoulders pattern. It was also painting a bull flag while trading above 0.00006 levels.

Less than three months later, it climbed as high as 0.00158 and grew by over 160%.

Daily chart of LINK/BTC

Litecoin appears to be following ChainLink’s footsteps. On February 8, 2019, the market broke out of an inverse head and shoulders pattern with extremely heavy volume. It consolidated for some time but in the process, it printed a bull flag to suggest continuation. Yesterday, March 6, Litecoin broke out of the bull flag with heavy volume. These similarities suggest that Litecoin may also be starting its own parabola.

Daily chart of LTC/BTC

Litecoin buyers are now coming in droves because they expect a big move up. Our technical indicators seem to affirm this bias.

Indicators Show Signs of Strength

With Litecoin trading above 0.013, technical indicators show that the market has a lot of gas left in the tank. A quick look at the weekly RSI shows that bullish momentum is on an unstoppable rise. As a matter of fact, it is already parabolic.  

Weekly chart of LTC/BTC

In technical analysis, momentum precedes price. Thus, if the RSI on the longer timeframe is significantly rising, we can form the expectation that the price will likely do the same.

On top of the weekly RSI, the moving averages on the daily chart shows that the uptrend looks strong. On February 20, we saw the 100-day moving average (MA) cross above the 200-day MA. With this golden cross, we have a bullish alignment where the 50-day MA is above the 100-day MA and the 100-day MA is on top of the 200-day MA. This setup tells us that the market is currently in a healthy uptrend.

Daily chart of LTC/BTC

With the uptrend looking sustainable, a parabolic move does not sound so farfetch’d. It actually looks very possible, especially if you consider the structure of the parabolic curve step-like formation.  

Market Structure Primed for Explosion

Before an asset can pull off a parabolic move, it must first create solid bases where it can explode. The smart money investors often the ones to establish the first base. The second and the third bases are where experienced traders usually get in. The fourth base is designed to reel in retail traders who are drawn by greed and the fear of missing out.

Generic parabolic structure

Source: Chart Pattern

Right now, we believe that Litecoin is in the early stages of base three. Base one is, of course, the accumulation stage between 0.007 – 0.01. Base two is the bull flag between 0.01 and 0.13. Base three will likely be the consolidation between 0.013 and 0.015.

LTC/BTC possible parabolic map

The current market structure makes this scenario possible.

The target of yesterday’s bull flag breakout is 0.015. Now, 0.015 is a durable resistance. Its strength is equivalent to Bitcoin’s $6,000 resistance. Therefore, if Litecoin breaches this level, we can expect the market to get really hot. It will pump so hard that we are likely to see 0.0225 as the minimum target.

Of course, Litecoin can go higher than the target. Because when an asset moves in a parabola, it can double its value in a short period of time.

Bottom Line

With Litecoin breaking out of consolidation yesterday, we are starting to see parabolic potential. With technical indicators showing signs of strength amidst a bullish breakout, the market appears primed for an explosion.

 

Disclaimer: The writer owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.