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


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

However, technicals suggest that LTC may erase most of these gains in the coming months.

LTC price paints a giant bear flag

Litecoin is paring its gains mainly due to a giant bearish flag on the weekly chart.

A “bearish flag” is a bearish continuation pattern that occurs when the price consolidates within an ascending, parallel channel after experiencing a strong downtrend. It resolves after the price breaks below its lower trendline with an increase in trading volumes.

Litecoin has been painting a similar pattern since early June 2022. Earlier, the LTC/USD pair experienced a 70% price correction from $130 to $40.50. Thus, from the technical perspective, it would resume its downward trend if its price breaks below the lower trend.

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LTC/USD weekly price chart with bear flag breakout setup. Source: TradingView

As a rule, a bearish flag breakout movement encourages the price to fall as much as the length of the previous downtrend. Applying the same setup to Litecoin brings its bearish flag bearish target to nearly $30.50, or 65% lower than the current LTC price.

Litecoin price “head fake”?

As stated earlier, Litecoin’s price recovery has mainly occurred in line with similar movements across the risk market due to cooling inflation.

For example, the Nasdaq-100 stock index rose approximately 15.50% between October 2022 and January 2023. Similarly, Bitcoin (BTC) has grown by more than 50% since its November 2022 low around $15,500.

The weekly correlation coefficient between Litecoin and the Nasdaq-100 was mostly positive at 0.35 on January 27th. Similarly, the correlation between Litecoin and Bitcoin is now around 0.21.

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The weekly correlation coefficient of Litecoin with Nasdaq-100 and Bitcoin. Source: TradingView

But Mark Haefele, the chief investment officer at UBS Global Wealth Management – along with many other analysts – has noted that the ongoing risk rally could be a “head fake”. In simple words, Litecoin’s ongoing rally, under the influence of its risky counterparts, could be short-lived.

Independent market analyst Capo de Crypto as well agreenoting:

“The way the upward movement happens, the way [higher-timeframe] resistances are tested… it clearly looks rigged, no real demand. Again, the biggest bull trap I’ve ever seen.”

Bullish scenario for Litecoin

However, not everyone is bearish on risky assets like Litecoin. Popular market analyst Rekt Capital sees Litecoin is rallying towards $160 in the coming weeks, citing a monthly chart as shown below.

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LTC/USD monthly price chart. Source: TradingView

In particular, the chart shows that the price of LTC is experiencing a strong rebound movement after testing multi-year uptrend resistance within the $40 to $50 area, which could qualify it for a further upward trend towards the $120–$160 range.

These high-level targets have previously served as supports and resistances. Breaking this key resistance could therefore cancel the setup of the bearish flag, which occurs 54% of all times, according to research by veteran investor Tom Bulkowski.

This article does not contain investment advice or recommendations. Every investment and business move involves risk, and readers should do their own research when making a decision.