Hope everyone had a wonderful weekend. I want to try to explain the most recent drop using TA and hope it helps anyone who is looking at learning this stuff. I don't usually post my TA but since this was such a huge event it's nice to have a discussion about this stuff. Sorry it can't be concise since there's so much going on and details help those that are interested in learning. So here goes...
First off, to be clear, the momentum was already in place for Bitcoin to drop hard well before the bad news started to come out. I believe the news merely put in place the worst case scenario and accelerated the drop. Anyone can speculate if a combination of whale movements and manipulation also helped push it down whether it be in the form of news, tweets, or sell/buy walls. This post isn't to cover that. I also won't cover the psychology of the market here but it was very reminiscent of the peak euphoria I've seen in Btc and alts in both 2013 and 2017.
Moving on. Ltc and Btc are intrinsically connected and have been since 2013. You cannot trade Ltc without having an idea where Btc is heading. So, Btc first.
When Btc on the 3d chart above broke out of the 42k zone this was the start of wave 5 (if you believe in Elliot). However, the push was not overly strong. It started ranging while forming an absolutely massive rising wedge that, anyone following Elliot knows, is a sign of a possible top. During this wedge formation we saw a bearish RSI divergence as seen with higher highs in the price but lower highs on RSI.
Zooming in on the 12hr above. RSI was forming a resistance area and we can see that when Btc broke 62k, RSI broke up too. But, Btc immediately turned back down and RSI broke back down as well on April 16 (this is important for LTC). This was the first sign that the wedge could breakdown which it finally did a day later on April 17. We then got a throwback in both price and RSI peaking on May 9 on the 3d. This was the critical moment for BTC and for any trader the best place to sell.
Moving onto Ltc since that is what really matters. Everyone probably remembers that 2 year Ltcbtc trend line break up, it was all everyone was talking about. Well that trend broke up with force on, you guessed it, April 16. On that break Ltcbtc was clearly strong but since Btcusd was dropping from the wedge then Ltcusd would drop too. If you go back to Btcusd on the 12hr this was a great place to sell Ltc.
This was the moment something wasn't right across the market though. Btc was weak but Ltc was strong as seen on Ltcbtc. There has never not been a RSI throwback in Btc. So one can suspect we should get a bounce and the next is an entry into Ltc due to the strength seen there. A good entry is the lower trend on Ltcusd.
On the Btc throwback, Ltc finally made its move (and it was long overdue). Ltcusd broke up strong and above it's rising trend line it had been forming over the last several months. However, Ltcbtc had a much stronger resistance zone that would hold Ltcusd back. There is a massive 3 year trend to break that no body has been talking about. At the time, it sat at exactly 0.007 which coincidentally also had been massive support in 2018 and 2019. Ltcbtc grazed exactly 0.007. But due to the weakness in Btc, and with Ltcbtc hitting resistance, coupled with the breakdown of the Ltcusd trend line, we had the signal we needed to move to cash soon. And that my friends, happened on May 9. Just like Btc, Ltc also had a throwback in both price and RSI that turned out to be an excellent exit point.
Now we wait. The RSI throwback was complete, Btc was showing a lot of weakness, hell even the laggy MACD had been red for a couple months already. Btc was due for the downturn and that meant Ltc was going down with it.
All eyes on Btc again for this one on the 2hr above. Think of every support line like the legs of a chair, the more it attacks the legs, the more likely it is to fall down. 46k was first support but it had been tested before on the 3d and was likely to break down.
42k was the first real support area as seen on the 3d as it was the January top and I don't think this was a surprise for anyone. Ltcusd was holding above that lower trend line and Ltcbtc was holding strong (it even shot above 0.007 briefly). This Btc and Ltc move wasn't a surprise and a good support area. I thought maybe Ltc could break 0.0007 but with Btc being bearish it didn't make sense to move to Ltc at this time. Then Btc hit 42k three times and it was ready to fall. I've always suspected we had to test the 38k support zone to wash out the buyers from the Tesla pump. And maybe overshoot it a bit into the 36k zone putting Ltcusd into the 240 area at the bottom of that lower trendline on the 3d. But then I saw this....
We were in for something big when shorts went up 3x on May 17. Btc was going to drop hard. What nobody could predict was how fast this went or how deep it went. This was so much like the March 2020 drop though. 29k to 30k was the next support and boy did we get there fast. As a hard rule, when Btc drops hard, alts get demolished and boy did Ltc get destroyed. All those open shorts closed too.
As Btc consolidated, alts did exactly what they always do after they get smashed... they bleed out. Ltc went and bounced off the upper 150 support area. But the more it hit it the more likely it was to break down too. Last line of defense was 120 which also happens to be the 78.6 fib line as seen on the 3d (March 2020 drop was an anomaly in a lot of ways and I prefer 40 Ltcusd as a starting point but this could be debated).
If you look back at the 2hr Btcusd chart above we had a bullish divergence and an excellent entry point. Ltc was a better choice over Btc since Ltcbtc bounced beautifully off that trend line that everyone was talking about a month ago. Btcusd 3d chart finally hit 30 RSI and any shorter timeframe we were very oversold, alts even more so.
So there it is, the crash explained from a TA standpoint. Could we go lower? Sure we could. Btc is full of surprises.
As a final point, you're probably wondering where we could go. I'm long Ltc and my bags are packed. As long as Ltcbtc stays strong then Ltc is the play. If that shows weakness then I'll likely exit. My bet is Btc either relentlessly recovers upwards or it forms some kind of upper trend line/triangle that breaks upwards. If would be very unusual for Btc not to test the 78.6 fib around 57k or at the very least the 61.8 fib at 51k, after a 40% drop. That area is a very heavy zone for the last several months. That puts Ltc around 255 to 295 which works out to the 50 to 61.8 fib (Ltc always likes to stay 1 fib line under Btc). If we're headed for a bear market that would be the place to reverse back down. But I also don't think we are done the bull market just yet. Time will tell. For now let's wait for something magical when Ltcbtc breaks up of that last final trend line. Then chikun can finally flap its wings.
For fun here's my trades. I dollar average out and in so these are averages and the dates I make the calls..
Sell Ltc at 310 on April 17.
Buy Ltc at 230 on April 24.
Sell Ltc at 375 on May 12.
Buy Ltc at 150 on May 23.
Also put 50k on a 10x leveraged long at 122 as a fun risky play (that was a rush at the time).
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