Can LTC Bullish Divergences Trigger Another 120% Litecoin Price Rise Against Bitcoin?
Will Litecoin Outperform Bitcoin? | Credit: Hameem Sarwar
Key Takeaways
- The Litecoin price has been in a bearish trend against BTC since February 28.
- Litecoin is generating bullish divergences that previously led to 120% increases.
- Can a similar upward movement happen this time around, or will LTC invalidate the pattern?
While Litecoin has been stuck below $100 since the start of April, the Litecoin/Bitcoin pair started an upward trend on April 13. A bullish divergence in Litecoin’s MACD and RSI happened before the increase.
Very similar bullish divergences and price action led to an over 100% Litecoin price increase in 2018 and 2021, respectively. This leads to the possibility that LTC history will repeat, especially if the price breaks out from its corrective pattern.
Litecoin’s Bullish Signal
Litecoin has trended downward against Bitcoin since February 2018, falling by 95% so far. During this time, it had two notable upward movements, the first in 2018, amounting to an increase of 180%, and the sceond in 2021, amounting to a smaller but still substantial 120% increase.
Both these movement shared the same signal, namely a bullish divergence in the weekly RSI and MACD. The bullish divergence developed over more than 120 days. During the 2021 movement, the price had traded inside a descending parallel channel for over a year and broke out after the signal.
However, neither of the movements led to a sustain bullish trend. Rather, the LTC price eventually created a lower low and resumed its downtrend.
An almost identical formation is currently being created. Firstly, the LTC price has decreased inside a descending parallel channel since the start of 2023. Secondly, both the RSI and MACD have generated bullish divergences. The divergences have transpired in a period of over 120 days, in alignment with the previous movements.
LTC currently attempts to move above the channel’s midline. The resistance trend line coincides with the ₿0.0018 resistance area. If LTC breaks out, the next resistance will be 120% above the current price at ₿0.0030. The amount of the increase will be in line with the previous upward movements.
Litecoin’s Relationship to BTC
The Litecoin/Bitcoin pair has had a positive relationship with BTC over the past two months. This means that an increase in the BTC price has caused Litecoin to appreciate against it and vice versa.
This correlation coefficient indicator (blue) confirms this. It has been positive most of the time. However, this changed in May (highlighted). The indicator is now at negative 0.8, which implies that a drop in the BTC price causes an increase in LTC/BTC.
The daily time frame chart shows that LTC has started its upward movement in the short-term. Firstly, LTC reclaimed the minor support at ₿0.0012 by creating a long lower wick (green icon). Then, the price broke out from a descending resistance trend line on May 8, possibly beginning an upward movement.
So, while it is still too early to determine if the bullish signal and a 120% upward trend will transpire, LTC has taken the first steps of breaking out from its long-term pattern.
Litecoin Could Finally Outperform BTC
The Litecoin price is stuck in a long-term downtrend against Bitcoin. While the downtrend will likely continue in the future, it is possible the LTC price will initiate a temporary relief rally, which will be confirmed with a breakout from the long-term channel. If this happens, it can trigger a 120% increase.
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