Litecoin is among the cryptocurrency market leaders today, up 6% intraday while Bitcoin remains flat. However, LTCUSD’s one-day rally could be enough to generate a short-term buy signal using Bollinger Bands. What could this mean for the altcoin, and could it be a sign that a more positive trend is starting?
Possible Buy Signal Lights Up in Litecoin
Litecoin has been one of the most painful coins to hold over the past few years. In 2017, silver went on a monumental nine-month rally against Bitcoin as digital gold. In those nine months, Litecoin rose over 10,000% and entered the top ten cryptocurrencies by market cap.
Much has changed since then, and Litecoin now ranks 18th by market cap, barely hanging on to the top 20. The altcoin has largely traded sideways for the past seven years since the 2017 bull run, much to the disappointment of investors.
There could be brighter days ahead, at least in the near term, as LTCUSD is giving a buy signal according to the Bollinger Bands.
All About Bollinger Bands and How to Use Them
Bollinger Bands are not just a technical indicator, but a complete trading system. The tool is primarily used to measure volatility, as the bands narrow and contract when volatility is low. When the bands begin to widen, it is a sign that volatility is returning.
However, beyond this, Bollinger Bands can also generate a buy and sell signal depending on where the price is relative to the upper and lower bands. Each band is set at +2 standard deviations from the middle line, which is a 20-period simple moving average.
The idea is that only the strongest and most likely sustainable moves break out of the upper or lower band. Today’s 6% surge in LTCUSD was enough to push above the upper Bollinger band. A close above the upper band is needed to confirm a buy signal, especially when supported by higher than usual volume. The volume downtrend has been broken, which confirms this additional flag when setting the coin up for a buy signal.
Tony Severino, CMT, is the author of the CoinChartist (VIP) newsletter. Subscribe for free. Follow @TonyTheBullBTC and @coinchartist_io on Twitter. Or join the TonyTradesBTC Telegram for daily market information and technical analysis. Please note: The content is educational in nature and should not be considered investment advice.
