Technical Analysis and Market Entry: Litecoin’s Bullish Pennant Failure Brings $100 Back in Focus

  • Litecoin’s price is subject to downside risks, following a failed completion of a bullish pennant pattern.
  • The bias remains short unless LTC/USD can break and close via the daily above supply $145-150.

LTC/USD: Recent Price Behavior

The Litecoin price has been through a choppy period over the last week of trading, exhibiting roller-coaster behavior. LTC bulls were in control of the price since the start of May, having gained as much as 76% from $66 up to the recent high print on 22 June at $145. Between 12-22 June, following such a strong run higher, the price began to consolidate.

Price action during this noted period formed a bullish pennant structure. Given this price formation, LTC/USD was subject to a breakout higher to resume the bullish momentum. The bulls, however, failed to capitalize on this pennant, which as a result, was punishing. After the price hit the highest level seen since May 2018, sellers quickly piled in.

Market bears were able to force a breach of the critical supporting trend line. LTC/USD plummeted as much as 25% from 22 June through to 27 June, catching some support around a known area of demand. The bulls then jumped reversed that initial drop south, gaining 25%, before running into resistance, which was the former acting support of the pennant.

LTC/USD daily chart.

Litecoin Halving – August 2019

It is just over one month away from the Litecoin halving; this is the process that sees the reduction of mining rewards of digital currencies to 50%. Litecoin, which runs on the same base code as that of Bitcoin, halves its mining rewards every four years.

Litecoin’s last halving was back in August 2015. In the month before this occurring, July 2015, LTC price jumped a chunky 400%, from around $1.70 up to $8.50. Given the historical behavior, it cannot be ruled out happening again, although some suggest it may have already been priced in this time around.

Trade Recommendation

Given the recent price rejection underneath the pennant structure seen via the daily chart view, LTC/USD is vulnerable to further downside pressure. The resistance can be noted around $137, the former lower acting trend line. A demand zone can be seen in proximity to the current price area, running from $130 down to $115. If this fails to find buyers, then another zone should be noted form $110 down to $100.

In terms of potential trade opportunities, shorts are eyed down to $105, with stops being placed just above the pennant at $146. A buy would then be attractive after the price pulls back towards the psychological $100 level. Eyes will then be on a retest of the $145 high area of June; stops would be placed at $95. Until the price breaks and can close above the $145-$150 zone, downside risks remain for Litecoin.

Disclaimer: The author 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.

Ken has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.