Litecoin (LTC-USD) has consolidated on its bullish start to 2019 in its pairing with the US dollar, pushing beyond the $83 mark and showing very little signs of slowing down. Widely regarded as an analogue of Bitcoin (BTC-USD), LTC has tagged along to the north with Bitcoin, gaining strength on the back of BTC’s meteoric rise in April and May 2019. As we head into the middle of the second quarter of 2019, we look at Litecoin to get some direction as to what lies ahead for this pairing.
Litecoin’s Q1 performance record has been consolidated with the gains it has made in April and May 2019. This is all coming on the back of the expected halving of its mining rewards that will occur in August 2019. Litecoin is programmed to reduce its mining rewards by half every four years or after every 840,000 blocks, whichever comes first. With 12.5 LTC going to be produced from every new block after the halving is complete, it is possible that buyers are snapping up as many Litecoins as they can before the process sets in. This may account for its stellar performances in the last two months.
The technical outlook for Litecoin begins on the weekly chart, where the price action was able to break the initial resistance identified at the $60.44 mark to push on to its present levels. At the moment, we see the price action on the weekly chart pushing upwards from an ascending support line as it marches towards the $92.41 resistance level.
LTC/USD Weekly Chart: May 11, 2019
Long-term buying volumes are moderate and not very dramatic, pointing to a more sustained upside move as opposed to the steep climb we have seen in BTC prices.
However, the daily chart (viewed a few hours later) has revealed that buying activity on LTC has picked up significantly, keeping pace with a similar uptick in buying on BTC-USD. This has pushed prices significantly higher to test the resistance level seen at around the $93.24 mark.
An interesting picture has developed with the formation of the XABCD pattern on the daily chart.
LTC-USD Chart Showing a XABCD Pattern in Evolution
After considering the chart information above, what are the possible trade scenarios for Litecoin at this time – particularly on its trading patterns with the US Dollar (a necessary note here as many coins are traded off of BTC trading patterns)
Trade Scenario 1
LTC prices are moving in positive correlation with BTC prices. In the long term, BTC is expected to test its long-term resistance at between $7000 and $7200 in a day or two. This will also coincide with a test of the $93.24 price level on the LTC-USD chart. A break of the $93.24 resistance is likely if buying volumes continue to rise and BTC prices continue to march northwards. Any bullish break will have to be confirmed by the time and price filters (i.e. the double candle close or the 3% penetration rule). A successful break of the $93.24 resistance will open the door for the price to attain the $115 long-term resistance (marked R2 on the weekly chart).
Trade Scenario 2
If the present resistance at the $93.24 price level is able to withstand the onslaught of the buyers, then we can expect the price to pull back from present levels. In the context of the evolving XABCD pattern, this will manifest as the pattern completes a move, which will be a downward leg from point D. The $83.16 support level will be the initial target for the completion move of the XABCD pattern.
The long term and mid-term outlook for LTC-USD is:
- Long Term – neutral to bearish
- Mid-term – neutral to bearish
Technically speaking, LTC-USD is still in the long-term downtrend, but if prices are able to breach present resistance levels and also the next resistance above the current one, market sentiment may change.
Mid-term, we expect prices to cool off a little, having made significant advances in the last 3-4 weeks. Therefore, the expectation for the mid-term is for the XABCD price move to be completed with a brief selloff to the $83 support line. From here, further price action will be dictated either via a renewed buying spree or by a resumption of bearish sentiment in the market.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.