The 50-week SMA has failed to sustain support for Litecoin, causing another contact on the upper resistance line of the collapsing wedge. The inability to stay above the critical moving average has led to decreased LTC expectations. Nonetheless, the decreasing negative momentum, as seen by the dropping wedge, supports the notion that the downside should be restricted to the June low.
After achieving an extreme departure from the 50-week SMA of 240 percent, Litecoin price corrected 75 percent from the May high of $413.91 to the June low of $105.00. This marks the highest LTC divergence from the moving average since the beginning of 2018 and an abnormally overbought state.
Since May’s crash, the price of Litecoin has gradually formed a falling wedge pattern. It’s support is forming between the June 2019 high of $146.00 and the 50-week SMA at $138.64. LTC has liberated from the moving average this week. It is maybe with the goal of testing the 78.6% Fibonacci retracement of the 2020-2021 rise at $108.23 or a sweep of the June low of $105.00. A test of the June low would imply a 15% drop from current levels.
Litecoin Potential losses
If Litecoin fails to find support in the $105-$108 level, it will likely test the junction of the wedge’s lower support line with the 200-week SMA (mean) at $96.28. This results in a 22% drop from its present price. Unless the current distractions of a weak cryptocurrency complex become stronger, any weakening beyond the mean would be unexpected.
However, based on the proximity of LTC near the 50-week SMA, if the correction is not completed soon, the potential losses might be significant. The cryptocurrency is now trading -11 percent below its moving average. This is nothing near the deviations seen at prior bear market lows.
Litecoin’s price, for example, was -51% below the moving average at its March 2020 low. The divergence was -40 percent at the low in December 2019. The divergence hit -76 percent at the December 2018 low. As a result, LTC investors should be wary of assuming that everything stops at the 200-week SMA. This is especially if the trend continues to put the cryptocurrency on the back foot.
A weekly close above the June 2019 high of $146.00 is required to debunk the bearish narrative. LTC can surge towards the 200-day SMA at $192.93 if it succeeds.
The collapsing wedge does point to a drop in negative momentum. The Litecoin price pattern suggests a positive turnaround in the future. It is, however, not assured, and the time is unknown. Despite the distractions of the poor cryptocurrency market, the presence of a bullish pattern with defined price levels suggests that LTC has a bright future ahead of it.
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