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Litecoin Technical Analysis: Selloff Coming

Litecoin Technical Analysis: Selloff Coming
Written by
Richard Sandle
Published on
November 29, 2017
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Litecoin was created in 2011 as an alternative to Bitcoin.The two cryptocurrencies are different in that Litecoin has smaller time intervals between adding new blocks to its blockchain, which leads to decreased transaction times. Also, in an effort to restrict ASIC miners and allow users to efficiently mine Litecoin on regular PC's, Litecoin's mining is governed by the Scrypt algorithm, as opposed to Bitcoin's SHA 256.Traders and investors are beginning to take notice of Litecoin potential. It consistently maintains a presence in the top five of cryptocurrencies by market capitalization.The daily chart below shows the strong upward price move that Litecoin is currently in the midst of. Litecoin is testing its all-time high of 93.62 which was set on September 2, 2017. All price movements for the last five days have been above the 9-day moving average, as shown on the daily chart.

Chart #1: Daily Price Chart

For the traders that are already in a profitable long position in Litecoin, the chart #1 shows a “rosey scenario” for you.For traders and investors that are looking to enter the market, this would not be the right time to enter. Although upward price momentum does seem obvious in the daily chart, a downward price swing is very likely after making a new all-time high.A close inspection of volume may reveal that the inevitable price dip is coming. In the daily chart, volume has been steadily diminishing since the current upward price swing began on November 11th, as shown by the shaded area.

Chart #2: 15-minute Price Chart

The 15-minute chart above shows trading activity for Litecoin’s current upward price momentum. The indications given by the volume patterns are too ambiguous for drawing any kind of solid conclusion. The volume spikes are very short-lived, and are not consistent in term of corresponding to a price movement direction.Also, there has not been an increase in volume since November 24th, yet price has continued to move upward. The current upward price movement has “no legs” and is in all likely hood not sustainable.This may prompt traders to ask the obvious question: What is driving Litecoin’s upward price momentum?The fact that the cryptocurrencies in general are currently on an upward surge with Bitcoin and Ethereum leading the way with recent new all-time highs for both.Litecoin may be the beneficiary of the cryptocurrency optimism being spurred by the Bitcoin and Ethereum phenomenon. Whatever the case may be, aggressive upward price movements of this sort accompanied by lackluster volume quite often result in equally aggressive price retracements.The good news is that a strong price pull-back makes for a good entry point for a long position.The savvy trader will wait for the next significant price dip, and enter when price resumes an upward tract with decent volume. We’ll be watching closely.Image courtesy of BTC Keychain via FlickrDisclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

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