Bitcoin and Litecoin Are in Vulnerable Channels

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Bitcoin and Litecoin Are in Vulnerable Channels

Virtual currencies bitcoin and litecoin have been bearish in 2014, but consolidated in October. In the second half of the month however, they have been drifting back down. Both cryptocurrencies are sliding within falling channels. Will these channels hold up when being tested?

Bitcoin (BTCUSD) 4h Chart 10/26
bitcoin 4h chart 10/26

(click to enlarge)

Bitcoin has been retreating after a bullish swing from 275, new low on the year, to 418. It is now hovering above 340. The 4H chart shows the market in a falling channel.

Now, if price comes back around the 375 area, it will be testing the cluster of 200-, 100-, and 50-period SMAs in the 4H chart and the falling channel resistance. If price can hold resistance here, the bearish outlook will be further confirmed by what’s known as a bearish slingshot signal – when price crosses under a key SMA then respects it as resistance. The bearish outlook has at least the 275 low in sight.

A break above 380 however would suggests further consolidation and bullish correction, especially if the 4H RSI pushes above 60. This will have the 418 high back in sight, with 450 being the next resistance pivot above that.

Litecoin 4H chart 10/26
litecoin 4h chart 10/26

(click to enlarge)

Litecoin has also been sliding within a falling channel after an October upswing from 3.38 to 4.22.

Price is already testing the channel resistance, and there is some resistance there at the moment. A break above 3.85 would clearly break above the channel, and the 100- and 50-period SMAs as well. In this bullish scenario, monitor for some resistance at 4.00. If price can hold above 3.80 then push above 4.00, it will be an additional bullish confirmation in the short-term, especially if the 4H RSI also breaks above 60.

The 4.22 high would be in sight, with 4.55 as the next resistance pivot in sight.

Now, if price fails to clear 4.00, or better yet, the 3.33-3.38 August-October low remains in sight to provide some support in the short-term, with the 2.21 low on the year below as the next support.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.