Welcome friends, to this update analysis on Litecoin! Let's get right to it! Looking at the four hour chart, you can see that (much like BTC) LTC is creating a bear flag, inside of a larger bear flag. This price action is essentially increasing the likelihood of a downside break of the larger bear flag. On the top of the small flag, you can see that the 20 EMA (in blue) is converging with it perfectly, which is increasing the resistance factor of the top of the flag. The current candle looks like it could move in to test the bottom of the flag, so I want to get this out quickly. If a downside break of the bear flag occurs, it could initiate some intense selling in LTC.
On the MACD, we can see that it has flattened out, as the momentum has died during this bearish consolidation. Volume is also decreasing, which is typical to see during flag consolidations, so the indicators are essentially confirming the flag action on the chart. That doesn't necessarily mean that a downside break is certain. Currently, there appears to be a high probability of a downside break, but I'm not here to "predict" whether or not it's going to break to the downside. That's not what analysis is all about. We identify patterns, and trade the breakout. Whether it breaks to the upside or the downside doesn't matter. I can make money either way, but for now, I am anticipating a downside break.
Here's how Magic plans to trade this flag. The moment it breaks to the downside, I will short it, with a stop loss just above the bottom of the flag, with the intention of seeing LTC fall to the 130 level. I will unload 1/4 of the position, at each 1/4 interval on the way to 130. If a reversal signal emerges anywhere in the middle of that trade, I would unload the entire short. If/when the rising green trendline is reached, I will exit my short position, and immediately look for a long position, after a bounce off of this extremely important rising trendline support. For now, let's keep our eyes on the charts, in anticipation of a breakdown of the flag. I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic. Au revoir.
This has been your not-so-humble market wizard, droppin' knowledge like bombs in this place! Please follow, comment, like, and share on social media. Good luck trading everyone!
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-Magic loves you-
-JD-
Komen
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To draw the green trendline, connect the low of 11/2 with the low of 2/6.
I don't understand this: I will unload 1/4 of the position, at each 1/4 interval on the way to 130. If a reversal signal emerges anywhere in the middle of that trade, I would unload the entire short. If/when the rising green trendline is reached, I will exit my short position,
Please clarify or be more transparent for someone that doesn't know to much about shorting, margins, and unloading?
max69
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@dstevens40, he means he will exit the position. ie. taking a little profit and reducing position by 1/4. Just the same as you might do if you were going long and locking in profits as the market rises.
@dstevens40, typically, when someone "shorts " a position, they are not just selling what they own...they do that of course, but also they "borrow" shares (lets say borrow 50 shares of LTC) from the exchange and sell them!-promising to return them later. And the goal is: to first SELL the shares at for example $170. each, and then BUY them back at $130. each, and then return the 50 shares you borrowed, and keep the $40. per share you made by selling high and then buying low. It is a way to make money when the market is going down. It is risky, because some news could spark the market to spike up, and you would have to buy the shares of LTC back when they were more expensive. Exchanges will only let you borrow the shares to short if you first get approval, and then also have other collateral (lets say USDT or BTC) in the exchange so that they know you can afford to buy it back if the market goes higher. ..... So if you "short" LTC by selling the shares, you might want to "get out" or "exit" by buying back the shares little-by-little or 1/4 at a time...to reduce your risk... after all, there is a good chance LTC will eventually go back to $900! and you don't want to get caught having sold it at $170, and still needing to buy it back at $900! So in this case, Magic might sell 40 shares at 170, and then buy back 10 at $160, buy back another 10 at $150, buy back another 10 at $140, and buy back the last 10 at $130, if I understood his post right. You can just place these orders and walk away if you are busy...but set an alarm incase it goes up!!! you could lose lots and lots of $$$. Good luck :)
dstevens40
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@earthling, Thanks and makes sense and def sounds like an aggressive move but very interesting.
mredig
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Magic, what exchange do you use? The ones I use typically don't have any way to short LTC against USD.
Love your work, but what's the point of addressing altcoins in USD? Most likely it'll just reflect bitcoin trends. They're only worth paying attention to if they gain against BTC.
MagicPoopCannon
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@kungfutzu, I like to see everything in dollar terms, if it's possible. I'm investing dollars, so I don't care about anything's relevance to Bitcoin. I care about it's relevance to the dollar.
Cold_Storage
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@MagicPoopCannon, As for LTC, its the coinbase effect also. LTC for most people in America was purchased through coinbase with American dollars. They will want to escape to the dollar when they sell and monitor any gains or losses in USD not BTC.
Please clarify or be more transparent for someone that doesn't know to much about shorting, margins, and unloading?