Litecoin Faces Major Resistance

Alan Penny

7 January 2020

3 min read

  • Crypto continues to underperform
  • Litecoin facing large round figure above
  • 50-day EMA in play

During the trading session on Tuesday, some weakness surrounding Litecoin was observed. This should not be a huge surprise considering that the cryptocurrency markets continue to get hammered longer term.

Litecoin is a secondary coin, so it is one of those situations where if the crypto markets rally, these coins should pick up more momentum. However, that is something we have not seen much of recently.

Technical analysis

Litecoin chart

The technical analysis for this pair features several different moving pieces. The market gapped slightly lower to kick off trading during the session on Tuesday, and has gone back and forth since. What’s interesting is that we are at the 50-day EMA, an area that will cause a certain amount of attention, being a longer-term trading indicator.

the possibility of a bounce in the short term, but clearly that’s an area that will attract a lot of attention from sellers

After a nice rally over the last couple of weeks, the 50-day EMA will now have a lot of different traders looking at a number of things. Furthermore, the $50 level above should offer resistance based on the fact that it is a large, round, psychologically significant figure just as it had previously been supportive all the way down. Looking at the chart, there is the possibility of a bounce in the short term, but clearly that’s an area that will attract a lot of attention from sellers.

Volume has dropped as well, which shows a general lack of interest in this market. The Litecoin market is simply in the midst of a technical bounce, which is something one would expect, as the market had dropped so drastically over the last several months.

That being said, crypto isn’t exactly in favor right now. That will continue to be one of the biggest problems with owning Litecoin, especially considering that, even though the geopolitical situation continues to get back, people are not using Bitcoin as a safety trade as they did in the past. In other words, if Bitcoin can’t get a boost, Litecoin certainly won’t.

Relief rally can be expected

The takeaway from this pair is that there may be a relief rally. Eventually though, the US dollar will overcome the crypto markets, with Litecoin being no different. The $50 level makes an ideal shorting opportunity, and therefore fading rallies that show signs of exhaustion would be the trade going forward, just as it has been for some time.

The $40 level underneath would be the target, and this “oversold bounce” could offer more of an opportunity. The outlook for crypto is murky at best, and gone are the days that just any crypto coin will go higher. That being said, if the market did break above the $50 level, the 200-day EMA currently trading at the $61 level will come into play as resistance.

Written By
Alan Penny

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