Litecoin – Breakout or Fake-out – Just Don’t Get Taken Out!

After failing to breakout of the range a little over a week ago, Litecoin is once again trying to breakout of the consolidation range.  The current price action may be pointing to a rally in the short term yet there is a key level just above the breakout zone which may lead to a potential fake-out.

To be transparent Litecoin is one of my favorite coins.   I am one of those that consider it the silver of the crypto space.  The reason is simple, I use it more than any other coin out there.   From transferring money from a crypto exchange or using it as trade capital in our MyFxChoice account or simply playing some online poker, it is quick to transfer and relatively inexpensive when compared with Bitcoin.

I also come from the metals market, and as a long time stacker I seldom sell my long term gold inventory, but silver I use for trading and increasing my gold stack.  So I relate well when Charlie compares Bitcoin to gold and Litecoin to silver.  In addition Litecoin does not have the drama issues Bitcoin Cash has had, of which I was a fan of until recently.

One other thing, when I am shopping online, I always look for those who accept Litecoin.  Maybe it is my biased, I will not discount that at all, but I first noticed it last year when shopping overstock for a dog sweater.  Yes my one pit-bull is thin haired so he needs a sweater even in Florida.  When I looked at the currencies they took, I immediately said, “ohhh I have Litecoin and they take it nice”.  So there is practical use for it and you can also buy it out of most Bitcoin ATM’s.  In simple words it has real world use.


LTCUSD:

Litecoin appears to be setting up for a breakout, but it is in a tough position here.  A couple points higher is a major resistance level and this is also where there are likely a lot of bag holders from the January rally looking to minimize losses or take in some small gains after seeing Litecoin give back the run.

However if Litecoin can push through the 35.0 area and this level becomes support we can look for some more conservative long trades as it starts to prove itself that the move is real.  The downside is this is also a high probability for a fake-out to occur.

A more aggressive trader may like the setup here and look to take a long trade, however, as a more conservative trader it is best to wait for confirmation.  In short Litecoin has not confirmed one way or the other that it is in a bullish trend, or at least provide us with a higher degree of probability that it is.  At least yet.

As good as the current move looks it can fall apart quickly especially if there is no follow through.  With that said it is we can not deny the breakout here and if the 33.25 support level holds today it would be a valid long setup, yet is the risk worth the reward?

Summary:

Do not forget that the market is generally trending as a whole, and Bitcoin could rally to the upper area of its range and fail.  This would suck in a lot of Litecoin longs as the move would probably me magnified.  This implies that a pullback could be very swift and retest the lower range of the channel.

Regardless it is all about risk management.  As an investor if you have been waiting to buy some Litecoin and do not have any, you are getting it at a multiyear low, no reason not to add some here.  If you are looking to cost average in over the long haul, again no reason not to add some here, however, it is important to manage your capital and not lump sum invest into a out of favor market.  Keep some money on the side in the event we test the low 20’s or even the upper teens.

As a trader this is a tight situation to trade.  Signals appear but are more prone to fake-outs in range bound markets.  We can still push lower and are far from out of the woods.  It is more important to have capital to trade when a favorable market returns than gamble it away in an unfavorable.  Many have which is why we are very conservative with out trade signals.  We expect to take some losses, but we manage our risk to minimize them.

Long term I am bullish however in the short term, I remain cautiously optimistic and any trades we issue will be labeled “aggressive” and exposure will be reduced to minimize a potential loss.  The worst thing a trader can do is leverage a position into an unfavorable market looking to get back lost money.  This can lead to being taken out of the game, as the sole purpose of any trader is to manage risk to insure, they have capital to trade the next day.  Once your out you are out!

Do not forget the radio show has been moved to Mondays at 4pm EST and will be an hour show.  This week we are going over “The Truth About Fibonacci Levels” and how we use them.

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