Litecoin approaches Bollinger Band buy signal after 6% rise

Litecoin is one of the leaders in the cryptocurrency market today, up 6% on the day while Bitcoin remains flat. However, a one-day rally in LTCUSD could be enough to generate a short-term buy signal using the 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, the silver to Bitcoin digital gold went on a monumental nine-month rally. During that nine-month period, Litecoin gained over 10,000% and placed the coin in the top ten cryptocurrencies by market capitalization.

Much has changed since then, and Litecoin is now 18th in market capitalization, barely holding onto the top 20. The altcoin has traded mostly sideways for the past seven years since the 2017 bull run, much to the chagrin of investors.

There may be better days ahead, at least in the near future, as LTCUSD is working towards a buy signal along the Bollinger Bands.

Litecoin is working on a buy signal supported by breakout volume

All About Bollinger Bands and How to Utilize Them

Bollinger Bands are not just a technical indicator, but they work as a complete trading system. The tool is mainly used to measure volatility, as the bands tighten and narrow when volatility is low. When the bands start to widen, it is a sign that volatility is returning.

In addition to this, however, Bollinger Bands can also generate buy and sell signals depending on where price is in relation to the upper and lower bands. Each band is set at +2 standard deviations from the center line, which is a 20-period elementary moving average.

The idea is that only the strongest and most likely to sustain moves break out of the upper or lower bands. Today’s 6% LTCUSD surge was enough to break above the upper Bollinger Band. A close above the upper band is necessary to confirm a buy signal, especially when supported by higher than normal volume. The downtrend in volume has been broken, ticking this additional box in the coin’s buy signal setup.

Tony Severino, CMT is the author CoinChartist Newsletter (VIP). Subscribe to free. Follow @TonyTheBullBTC & @coinchartist_io on Twitter. Or join TonyTradesBTC Telegram for daily market information and technical analysis education. Disclaimer: The content is educational and should not be considered investment advice.

Featured image from ChatGPT, charts from TradingView.com