One week ago, Litecoin saw an enormous flood of volume hit the market as it popped through low time-frame overhanging resistance. This rally was so strong and sudden that the LTC-USD price popped almost 50 percent in just a few hours:
Figure 1: LTC-USD, Four-Hour Candles, Latest Rally
This rally was on a very large spread and very high volume. The figure above shows a break of new highs followed by very little follow-through. This rally is very significant because it represents a macro test of resistance and a test of the bear market’s supply and demand channel:
Figure 2: LTC-USD, Daily Candles, Resistance Test
The blue, descending channel has defined supply and demand regions of the bear market for the last year and a half. Currently, we are positioned right at the the top of the channel and are failing to breaking the macro, horizontal overhanging resistance. The breach of the supply/demand channel’s top puts the market in an overbought situation, and we are currently seeing sustained supply enter the market with every bullish rally on the lower time frames:
Figure 3: LTC-USD, Hourly Candles, Low Time Frame Tests of Supply/Demand Channel
On the hourly time frame, we can see several tests of the supply/demand channel shown in Figure 2, and each attempt to test the upper boundary of the channel has shaken supply loose in the market and shoved the price down. The trend has seen lower lows and lower highs, and the supply doesn’t seem to be weakening. The highest round of sells occurred a few hours ago and came on the heels of a strong rally upward. However, this strong rally was quickly reversed and pushed downward.
If this market fails to hold its current level, we can expect to see a retest of support below. The current trend with the supply/demand channel has yielded a reactionary rally to the bottom of the channel once the upper channel has been tested. The weekly trend shows a very strong level sitting right at our current low, so it seems reasonable to expect a retest of this support level at some point to establish the strength of the demand in this zone:
Figure 4: LTC-USD, Weekly Candles, Macro Support
The support level (shown in pink above) has held up so far, and the market is currently sitting right below the overhanging resistance. If we fail to break the overhanging resistance, a test of the broken levels outlined above will likely need to be conducted before a convincing round of bulls step in. So far, the market is failing to break the resistance and seems to be business as usual and will likely continue the trend we’ve seen throughout the bear market.