As a result of a general market sell-off, the price of Litecoin experienced a decrease of 8%. At the time of this writing, the price of the alternative cryptocurrency had fallen below the significant support level of $140 and was about to test the swing low from 19 May, which was $116. Even though panic buying might be able to make up for some of LTC’s recent losses, there was still a significant risk that the price would fall even further in the coming week.
The daily chart for Litecoin
As the price of the alternative currency moved closer to the demand zone that ranges from $116 to $140, Litecoin (LTC) registered losses of 22% as the descending channel breakdown occurred. Since the 21st of June, the price of LTC has spent the majority of its time fluctuating between these two points because buyers have been able to match the level of selling pressure. However, the candlesticks were trading below their 20, 50, and 200 simple moving averages (SMAs), and because LTC does not have support from these moving averages, it is always susceptible to an extended downward trend.
Reasoning
Since the 17th of April, the OBV has been on a consistent downward trend, even during periods in which LTC was making new local highs. Even before the wider cryptocurrency sell-off, this divergence pointed to the possibility of a pullback. At the time of this publication, the index was continuing its downward trend as the volume of sales exceeded the volume of purchases.
The fact that the Relative Strength Index has not moved higher than 50 for more than a month demonstrates that the market is in a state of weakness. A move into the oversold zone does warrant a reversal, one that could push LTC back towards its 20-day simple moving average (in red) and $156 over the coming days; however, gains would be short-lived in a market that is largely dominated by sellers.
Despite the fact that the MACD made an attempt to recover above equilibrium, momentum was lost as sellers took back control of the market.
In addition, a death cross can be seen to be approaching as the 50-SMA has inched closer to the 200-SMA, and pessimistic sentiment is likely to exaggerate any losses that occur as a result of this development. If the price of the stock were to close below its swing low of $104 on June 22, it could begin a steady decline of 40% that would bring it to levels similar to those seen in late December. It’s interesting to note that the point on control for the Visible Range was also located around this mark.
Conclusion
The demand zone for Litecoin, which sits between $116 and $140, may be responsible for a minor comeback in the market; however, bears will dictate its movement over the next week. A close below the swing low of $104 that was reached on June 22 could pave the way for another 40% drawdown to levels that were last seen in December of 2020.