Litecoin falls below a bullish order block, $40 could be the next target
Disclaimer: The information presented does not constitute financial, investment, trading or other advice and reflects the opinion of the author only.
Just a week ago, Litecoin [LTC] rallied to the $61 level but got rejected there. This was a bearish development, especially for long-term investors. The market structure remained bearish and the psychological level of $50 has been defended for the past few days. However, the selling pressure started to build again.
LTC – 12 hour chart
In May, LTC formed a range from $61 to $74 (white). A week into June, the lows in this range have not held. The wave of intense selling saw Litecoin drop all the way to $40.2. Over the following weeks, the price saw a rally towards the $61 area.
The Fibonacci retracement levels (yellow) plotted showed that the $61 mark was the 61.8% retracement level of the move from the $74 low to $40.3 high.
Additionally, the $61 area was also the low of the range formed in May. The confluence of these two resistances was strong and LTC faced a rejection from the $61 area.
LTC – 4 hour chart
The rejection of the $61 area was expected to find some support in the $51-$52 area (cyan box). It was a demand zone, and it also had a bullish order block on the four-hour chart. Additionally, this area was just above the longer-term horizontal support level at $50.4.
Therefore, we once again have a confluence between the bullish order block and a horizontal support level. Still, the price rebound has been only weak from this zone.
Twice in the past few days, a rebound has been observed. Each of the bounces failed to close a trading session above $54. At the time of writing, the price appeared to be slipping below the $50.4 support level as well as the demand zone above it.
The four-hour Relative Strength Index (RSI) slipped below the neutral 50 line a few days ago and retested the same as resistance. This suggested that the momentum had swung in favor of the bears. The Chaikin Money Flow (CMF) also agreed and showed that in recent days significant capital has left the market.
On the other hand, the On Balance Volume (OBV) did not show strong selling pressure. In fact, over the past week it has been able to climb higher on the charts and has only seen a slight dip over the past three days.
LTC’s price action in recent trading sessions has shown the $50-$52 area to be a crucial support zone. If there was a session near the psychologically important $50 level, it could see Litecoin start dropping much lower on the charts.
Therefore, aggressive sellers may look to enter short positions on a session that closed below $50, with a stop-loss just above $52. The $48 Fibonacci retracement level might offer weak support, but below it the $40 area beckoned.