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Litecoin ‘head fake’ rally? LTC price technicals hint at 65% crash

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Litecoin (LTC) has rebounded by 130% to almost $100 after bottoming out near $40.50 in June 2022. The primary reasons include broadly improving risk-on sentiment and euphoria around Litecoin’s upcoming halving in August 2023.

Nonetheless, technicals counsel that LTC might wipe out most of those beneficial properties within the coming months.

LTC worth paints large bear flag 

Litecoin stands to pare its beneficial properties primarily as a consequence of an enormous bear flag on the weekly chart.

A “bear flag” is a bearish continuation sample that happens when the value consolidates inside an ascending, parallel channel after present process a powerful downtrend. It resolves after the value breaks beneath its decrease trendline with an increase in buying and selling volumes.

Litecoin has been portray the same sample since early June 2022. Beforehand, the LTC/USD pair had undergone a 70% worth correction from $130 to $40.50. Thus, from the technical perspective, it will resume its downtrend course if its worth breaks beneath the decrease trendline.

LTC/USD weekly worth chart that includes bear flag breakdown setup. Supply: TradingView

As a rule, a bear flag breakdown transfer prompts the value to fall by as a lot because the earlier downtrend’s size. Making use of the identical setup to Litecoin brings its bear flag draw back goal to almost $30.50, or 65% decrease than the present LTC worth.

Litecoin worth “head faux”?

As mentioned earlier, Litecoin‘s worth restoration has primarily occurred consistent with related strikes throughout the risk-on market due to cooling inflation.

For instance, the Nasdaq-100 stock market index has risen approximately 15.50% between October 2022 and January 2023. Similarly, Bitcoin (BTC) has rallied by greater than 50% since its November 2022’s low of round $15,500.

The weekly correlation coefficient between Litecoin and the Nasdaq-100 has been largely optimistic at 0.35 on Jan. 27. Equally, the correlation between Litecoin and Bitcoin is now round 0.21.

Litecoin’s weekly correlation coefficient with Nasdaq-100 and Bitcoin. Supply: TradingView

However Mark Haefele, the chief funding officer at UBS World Wealth Administration — together with different many different analysts — has noted that the continued risk-on rally could possibly be a “head faux.” In easy phrases, the continued Litecoin rally, underneath the affect of its risk-on counterparts, could possibly be short-lived. 

Impartial market analyst Capo of Crypto additionally agrees, noting:

“The best way the upward motion is occurring, the best way [higher-timeframe] resistances are being examined… it clearly seems to be manipulated, no actual demand. As soon as once more, the largest bull entice I’ve ever seen.”

Bullish state of affairs for Litecoin

Nonetheless, not everyone seems to be bearish on threat property corresponding to Litecoin. Widespread market analyst Rekt Capital sees Litecoin rallying towards $160 within the coming weeks, citing a month-to-month chart setup as proven beneath.

LTC/USD month-to-month worth chart. Supply: TradingView

Notably, the chart reveals LTC‘s worth present process a powerful rebound transfer after testing a multiyear ascending trendline resistance contained in the $40 to $50 space, which might qualify it for an extra uptrend towards the $120–$160 vary.

These upside targets have beforehand acted as helps and resistances. Breaking this key resistance might subsequently invalidate the bear flag setup, which occurs 54% of all time, in line with research by veteran investor Tom Bulkowski.

This text doesn’t comprise funding recommendation or suggestions. Each funding and buying and selling transfer entails threat, and readers ought to conduct their very own analysis when making a choice.