October Consolidation May be Over:
Virtual currencies bitcoin and litecoin have been bearish throughout 2014. It’s been a choppy one, and the price action in October for both cryptocurrencies have been that of bullish correction. The second half of the month however seems to have shifted the mode, and both are showing signs of bearish continuation.
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After the October rally from 275 to 418, bitcoin has retreated back below the 200-, 100-, and 50-, period simple moving averages in the 4H chart, and broken below a triangle support. Price has been is making lower highs and lower now during the second half of the month, reversing the pattern of the first half. The RSI has fallen below 40 and even below 30, which shows bearish momentum.
The bearish breakout in the last couple of sessions exposes the 275 low on the year with risk of further downside because the prevailing downtrend is still intact despite October’s bullish attempt.
Now, if price fails holds above 340 and pops up above 380, we should anticipate further consolidation, and bullish correction with pressure back on 418.
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Flag Pattern Breakout:
After rallying from 3.38 to 4.22 in the first half of the month, litecoin has retreated, and broken below October’s rising channel, which in a larger time-frame would be a flag pattern. Just like bitcoin, litecoin has crossed back under the key SMAs, and the 4H RSI has dipped below 30.
At this point, as long as price can hold below 4.0, the bearish trend should be in play. In the bearish scenario, the 3.33-3.38, August-October lows will be in sight in the very short-term. With the prevailing downtrend intact, further downside risk can be assessed, and a break below 3.30 would expose the 2014-low at 2.21.
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