Litecoin is rallying versus Bitcoin and the rotation trade into and out of Bitcoin will continue to yield great opportunities
I don’t normally put straight-up trading commentary here on the blog, but looking at the charts this morning I saw something so significant it I had to share it.
Litecoin has been lagging behind Bitcoin for weeks now. While the peak to trough pull back in Bitcoin was right around 40%, the pullback for Litecoin was over 50%. And because of that the LTC/BTC ratio has become stretched to the downside.
A look at the LTC/BTC pair over the last week shows you what’s happening. Volume dried up early on October 12th and the pair bottomed near midnight. Then during the evening the price bolted higher as volume came in and peaked around mid-day.
We’ve got a strong indication of a bottom here in the LTC/BTC pair because of the enormous volume that’s come into the market now that BTC has moved past $5000 USD.
This morning’s price action is now showing you that the LTC bears have given up their selling. Less volume is pushing the price much higher. They are Lifting their Offers. Them are no longer Hitting the Bids.
This is a very important point about how markets trade. When the market is bearish, sellers hit the bids. As the new, higher bids come in, bears sell into them (hitting them) to keep the price down.
But, once the buying pressure becomes too intense the supply of sellers hitting those bids dries up and the remaining ones start lifting their offers to sell, putting them up at higher prices. And thus, now the bulls have to chase the price higher.
This is why you buy the breakout point but don’t chase it. The best thing if you didn’t buy the bottom is identify what the breakout level is and then when it’s breached on a closing basis (in whatever time frame you are watching), you buy the confirmed breakout.
But, also sell the top in the same manner, after a confirmed top and reversal. These markets are so volatile, however, that it is difficult to time them perfectly. So, bottom and top picking is a better strategy. Professional traders use reversal signals to create head fakes and confuse you.
For a month the LTC/BTC pair has fallen more than 50% putting it at long-term support. Litecoin’s ratio to Bitcoin has bottomed on volume similar to that which marked the top back in September.
This is a longer-term chart. And looking at this you can see the massive amount of selling into this bottom occurred. These guys hit a lot of bids and churned the price for more than a day to accumulate on the spread (selling the top of the bars and buying the bottoms).
In my Private Blog article from Thursday I explained this situation to my Patrons and told them to be a buyer of Litecoin on any initial peak of the Bitcoin price. I saw then that a lot of alt-coins were not participating in the rally, I knew there would be rotation. Litecoin was moving higher in dollar terms but not in BTC terms.
Now it’s doing both.
Anyone who sold into the Thursday night peak or simply bought more Litecoin with dollars is in a good position this morning.
As Bitcoin makes it’s way past $6000 on this leg up, there will be even more of these rotation trades pop up. Charting them versus Bitcoin is the way to see this clearly.