So after yesterday's crash, we're looking at a return to some normality, although it could be argued nothing is ever sane in the digital currencies market.
Lets analyse the H4 Litecoin chart below (click on the image to expand):
There's one very special candle there. Namely, the 16:00 candle (marked with an arrow). The reason it's special is due to two simple facts. One, it's a bullish candle. Nothing so special about that of course. But the combination of the second fact, gives us a very powerful piece of information. That second fact being, the candle, whilst being bullish, had closed below the lower Bollinger line. And whenever these two attributes combine into one candle, it's a clear sign the market is gearing up for a potential reversal. And that's exactly what happened here.
Of course, that's not to say every time such a candle occurs it means a reversal will occur, but at the very least it should make us sit up and pay attention.
So looking further, we saw how other factors were in our favour as well. That candle closed above the 38.2% Fib level, the Stochastics were heading up, without being overbought. We then saw price increase to around 18 (significantly a whole number), which also happens to be the 50% Fib level. Unsurprisingly, price bounced at that level, as some investors cashed out.
As of right now, we're seeing price hovering around 18.22, after just managing to break through the red trendline I've drawn. Over the next eight hours or so, I'd expect the trendline and the 50% Fib level to provide some level of support.
However, as we can see, the 61.8% Fib level is very close to another round number, (19), hence we'll probably see that acting as a serious piece of resistance, with the Accelerator Oscillator most likely turning red within a few candles as well.
Analysis provided by Ashton Fraser, learn more about his trading strategies at Forex Reversal.
