Litecoin Technical Analysis | Intro to Fibonacci Levels, Elliot Waves & Kaytranada
I am a keen advocate of elegant simplicity.
If you can streamline a process or a product to where it retains its maximum potential without unnecessary additions, then I’m all for it (who doesn’t enjoy a bit of Danish design?)
This love of clean presentability and functionality is additionally present in the way I like to analyse technical charts, be they of Crypto, Commodities or Stocks.
I believe that all one needs is a few trend lines, a Fibonacci Tool, and a basic knowledge of Price Action patterns to make sense of the movement of these markets. If you follow fundamentals and news articles like a hawk, then feel free to utilise these as added confluence to justify taking a trade. However, these articles will be purely technical, as I believe that rather than try to take into account every news story, every article, every opinion, one can simply see all this information perfectly reflected in the price. The Price doesn’t lie. The Price absorbs and compiles all available data into neat candles. Elegantly simple.
As Beecher so eloquently put it:
“True elegance becomes the more so as it approaches simplicity”
CryptoCurrency is becoming ever more tumultuous by the day, and if we take a step back, and apply tried and tested technical methodologies to this Brave New World, we may find that they too respect the patterns of natural systems, thus allowing us to apply our trade and profit accordingly.
Today we will be delving into the world of Litecoin to see if we can identify some crucial areas for this market where traders would be interested in buying/selling. As this is the first article I shall be doing some top-down analysis of the pair, but future articles will predominantly be 4H and 1H updates.
Daily Chart
As I’m sure you all know, LTC/USD was very much included in the huge bullish wave that washed over the major cryptocurrencies towards the end of 2017. We have a potential wave 1 high at A, falling just short of the $100 mark, and then a steep decline back to its ranging territory around $35. This is my line in the sand to begin some Fibonacci analysis. It is a clear low, and the indisputable beginning of the huge bullish move that took LTC up to $419 (B). This was the period of frenzy fundamentals, driven by wild sentiment and severe FOMO. Any trading here was gambling, plain and simple (Lambos Bro).
Since then we have had some huge swings (the HODL gang would have been sweating it on the 22nd Dec) followed by a steady decline into the Spring of 2018. Luckily for us technical aficionados, the cryptocurrencies seem to adhere to basic parameters such as Support, Resistance, and Fibonacci Retracements. Now that we have major highs and lows and are no longer in uncharted territory we can use these techniques to identify high probability entry and exit points, either for Day Trading or Long Term Investments.
The decline lasted until early Feb (C) where the market has kissed the high made back at A last year, with added confluence at the ‘last chance’ 78% Fibonacci retracement. The market is therefore clearly respecting zones, especially at key levels, so let’s zoom into a smaller time frame.
4H
Here we can see the decline off the top in more detail, and I have drawn a descending trend line from the high. If you were looking to day trade this market, bounces off this trend line (the third and 4th touches) would have been profitable short trades. Unfortunately, the past is the past, and we are now looking forward.
LTC eventually recovered from this slump and broke through this line, a sign of bullish strength and potential trend change (at least short-term). The market has then come up to retest that $240 level (a Fib 50% retrace of the large move down) and has now declined, currently resting on the 50% retrace of the Impulsive bullish leg up (Labeled A in below image)
1H
This is where it gets interesting.
The move off the February low could be labeled as a 5 Elliot wave impulsive move, followed by a 3 wave corrective decline. This is basic Elliot Wave Theory, which essentially states (please excuse the simplicity of this summary), that impulsive moves happen in 5 waves: 3 in the direction of the move and 2 against. Wave 3 is always the longest and the strongest, and then wave 5 is usually followed by a 3 wave A B C correction pattern before resuming its initial direction. Each of these waves can be further broken down into more waves, but that’s another topic for another day.
There are whole books devoted to this topic, and please be my guest and go and read them, but as stated earlier the theme of this piece is to keep it simple, keep it lite. Therefore I have labeled the waves as I believe they have formed, and am keeping a keen eye on the C wave. I believe that currently there may be a bounce off the 50% retracement (blue circle), but the momentum carried by that huge decline will continue down until at least the 62% retracement at $160. Patience is key, and the price action if and when we reach that level will be an indicator of LTC’s next move.
Conclusion
One must bear in mind that this is all speculation, and the market may plough upwards or downwards with no regard for all the nice drawings we have put on the graph. You just have to expect and accept that as a reality. However, as seen in higher time frames, this market respects key zones, it respects Support and Resistance, but it won’t respect us traders if we aren’t patient with our moves.
For now, let’s wait and see. If we see a break above that blue trendline, we might be off to the races, if not then there will be a greater opportunity in the near future around the $160 level. Price action will tell us more, but Price Action is much more effective at key levels.
Don’t allow the markets to stress you out with their fluctuations. Allow them to move and hope on board when you’ve seen a definite turn. Keep it simple, listen to Kaytranada’s Lite Spots, maybe even sing along while you trade, and I dare say Lite Spots and Litecoins will help you feel completely happy.
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Me sinto contente Me sinto muito contente Me sinto completamente contente Ouso dizer completamente contente |
I feel happy I feel very happy I feel completely happy I dare say completely happy |
Disclaimer: Readers should do their own research before investing funds in any company, cryptographic asset or piece of equipment. Coindrift shall not be responsible or liable, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any such content, goods or services mentioned in this article.
