Renowned trader John Bollinger has recently expressed his worries about Litecoin’s performance, particularly when compared to Bitcoin. As the developer of the popular Bollinger Bands, Bollinger highlighted a troubling pattern in the Litecoin market. According to him, the most concerning aspect is its underperformance in relation to Bitcoin. Furthermore, Bollinger noted the presence of a bearish signal known as a “2 bar reversal” at the lower Bollinger Band in the LTCUSD price.
Examining the chart of the LTC/USD pair provided by Bollinger on November 28, 2023, it becomes evident that Litecoin’s price is struggling to gain bullish momentum. The price is currently hovering around $69.566, which is significantly lower than the upper Bollinger Band. This observation suggests a lack of bullish strength in the market. The Bollinger Bands form by plotting a range of standard deviations above and below a simple moving average, thereby enveloping the price action. In the chart, on both the daily and weekly scale, the LTC/USD price is seen struggling beneath the midpoint of these bands, indicating a bearish outlook. Notably, the current price level is substantially below the upper band level of approximately $90, which acts as a potential resistance level.
The Bollinger Bands (BB) on the chart are constructed using a 20-period moving average and a 2 standard deviation range. Bollinger’s analysis points to a “2 bar reversal” pattern that emerges near the lower band. This pattern occurs when a bar reaches a high above the preceding bar but then closes below the close of that same previous bar. The presence of this pattern signifies a potential reversal from the uptrend. As such, any upward movement in price is met with resistance, ultimately succumbing to the prevailing selling pressure.
The Bollinger %B indicator is a crucial tool in this analysis as it compares the price of Litecoin to the range defined by the Bollinger Bands. When the %B value is below 0.5, it indicates that Litecoin’s price is closer to the lower band than to the upper band. Such a scenario may suggest weakness in the market. In the chart, the %B indicator fails to cross the 0.5 level after experiencing a plummet towards 0. This suggests that the price frequently touches or falls below the lower band, indicating a lack of strength in Litecoin’s market position.
Another indicator worth considering is the Bollinger Band Width (BBW), which measures volatility by assessing the width of the Bollinger Bands. A narrowing of the Bands, as observed in the latter part of the chart, indicates a decrease in volatility. This narrowing often precedes a significant price movement. In the context of the Litecoin market, the narrowing of the BBW suggests that the market is becoming tense, possibly gearing up for an impending breakout or breakdown.
It is crucial to note that Bitcoin typically leads the cryptocurrency market trend. Therefore, when Bollinger mentions Litecoin’s underperformance relative to Bitcoin, it may signify a lack of confidence or interest from traders in altcoins, especially Litecoin. This lack of interest is further evidenced by the ongoing rise in Bitcoin dominance. Thus, Litecoin’s failure to keep up with Bitcoin’s movements is a cause for concern.
John Bollinger’s technical analysis points to a precarious position for Litecoin. The price action at the lower Bollinger Band, the bearish “2 bar reversal” pattern, the sub-0.5 Bollinger %B values, and the narrowing BBW all indicate that downward pressure may persist for Litecoin in the near term. At the time of writing, Litecoin is trading at $70.05. Looking at the 1-day chart of LTC/USD, it is evident that the altcoin recently fell below the key support level of the 0.236 Fibonacci retracement at $69.98. A retest of this level is currently taking place, and a daily close above it is of utmost importance for the Litecoin price to regain stability.
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