Litecoin is forming a descending triangle above last week’s inverted head and shoulders pattern. The 1H chart shows price holding support at 4.85, while the highs are declining. As we get into the 9/9 session, price seems to be in an ABC bullish attempt that has the triangle resistance in sight. Litecoin is essentially trapped in consolidation with no directional trend or momentum in the 1H chart. A break below 4.85 would signal a bearish outlook, first with the 4.60 low on the month in sight. A break above 5.20 would clear the triangle resistance for the descending triangle in the 1H chart and also for one in the 4H chart. We’ll get into that in a little bit.
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Larger Triangle; Bearish Bias
When we look at the 4H chart, we can see that litecoin is forming a larger descending triangle as well. This triangle formed after a rally from 3.33 to 6.19, which was a bullish correction against a prevailing downtrend. So, there is some bearish bias, though the bearish momentum has been lost. Now, if the 1H triangle breaks, price is exposed to 4.60. Then, a break below 4.60 will signal a bearish continuation outlook and open up the 3.33 August low.
Note that even with a break below the 4.85 level, we will start to see some bearish bias return in the 4H chart because litecoin would be under the 200-, 100-, and 50-period simple moving averages. Because of the fractal triangles, a break of the smaller triangle puts major pressure on the larger triangle’s support.
Now, if price rallies above 5.20, it would clear above both triangles. A break above 5.30 would be an even stronger sign that the bearish outlook is shelved. This scenario opens up a short-term bullish outlook back toward the 6.19 consolidation high. Then, a break above 6.20 can liberate litecoin from the medium-term bearish outlook, and introduce a bullish one.
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