A 37% price rally in November for Litecoin (LTC) risks exhaustion as the “silver cryptocurrency” indicates the formation of a double-top chart pattern.
The classic bearish reversal setup occurs when price makes two consecutive highs of nearly the same level, with each upward move hitting a strong correction towards a common support level called the “neckline”.
Typically, the price breaks below the support and drops to the maximum height between the top and the neckline of the double top.
So it seems that Litecoin is halfway through forming a double-top pattern, as shown in the graphic below.
In detail, the price of LTC peaked at $ 295.50 – its first high – on Nov 10th before correcting down towards the neckline support of around $ 249. This was followed by a rebound to $ 280 – the second high – which eventually attracted profiteers to effect a minor correction that is still underway.
Litecoin would have to extend its sell-off to test the clipping again. Meanwhile, falling below the support level would activate the double top breakout setup, with the profit target near $ 200.
The Bitcoin Correlation
Litecoin’s bearish reversal pattern emerges as inflation in the United States soared to a three-decade high, prompting investors to seek hedging across various financial instruments.
For example, the most actively traded gold futures recently had their best week in six months, rising 2.9% to $ 1,868.50 an ounce after the U.S. Department of Labor pushed the consumer price index (CPI) up 6.2%. had reported year-on-year -year. This was the fifth month in a row with inflation above 5%.
Many investors and / or traders turned to Bitcoin (BTC) after seeing it as a safety net against rising inflation, noted Wilfred Daye, head of Securitize Capital – Securitize Inc’s asset management arm despite its worrying price volatility.
“We don’t have long enough history to claim that Bitcoin is actually an inflation hedge,” said Daye, adding:
“I would argue that gold is still a better protection against inflation. But Bitcoin as an inflation protection is a new sexy concept – people love new ideas. “
Bitcoin’s growth has also helped Altcoins rise at the same time thanks to its wider influence in the crypto market. Litecoin was one of the beneficiaries of the rally as its one-year correlation efficiency with Bitcoin was 0.71 above zero, according to data from Cryptowatch.
As a result, concerns about persistently higher inflation have acted as a tailwind for Bitcoin’s Litecoin gains. That could play some spoilers for the bearish double-top setup featured above – and confirm a bullish pattern that has been active since last weekend.
Litecoin “Bull Pennant” sets the LTC target at $ 350
The bullish continuation pattern is known as the bull pennant and appears when price consolidates sideways in a triangular structure after a strong upward rally. Traders confirm a bullish breakout when the price breaks above the upper trendline of the triangle with strong volume.
Similar: Litecoin hits 6 month high as LTC price rises 20% in 24 hours
In doing so, they consider the level equal to the height of the previous uptrend (also known as the flagpole) as their profit target. As a result, the price of Litecoin is seeing a longer upward move towards $ 350 as shown by the setup in the graph below.
In the meantime, there is a risk that the double-top setup will be activated if there is no decidedly bullish follow-through effect. This brings “several months of rising trendline support” into the picture as the next downside target should a bearish collapse move; Coincidentally, the goal is also $ 200.
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