The analyst explained that a bear flag is potentially forming for Litecoin which, if confirmed, could cause LTC to drop to this level.
Litecoin may face a deep decline due to bear flag
IN post on X, analyst Ali pointed out a possible form of a bear flag for Litecoin. A “bear flag” is a pattern in technical analysis that, as the name suggests, looks like a flag on a pole.
The pattern takes shape when an asset sees a piercing downward movement, followed by a period of consolidation. This consolidation is in the direction of a slight overall uptrend, which means that its upper line is formed by connecting higher highs together, while the lower line is connecting higher lows together.
The pre-consolidation downtrend is catching up on the pole, while the channel looks like a flag. Inside the flag, price will likely see resistance at the upper level while support will be at the lower level.
A bear flag is commonly considered a continuation pattern, which means that the downtrend will continue once the pattern has formed. This continuation occurs when the price finally completes its consolidation and breaks through the lower level of the flag.
Like the bear flag, there is also a “bull flag” that forms in the opposite circumstances. In the case of this formation, the price breaks out with a piercing upward movement after the end of the downward consolidation period.
Here is a chart shared by the analyst that sheds featherlight on a possible bear flag formation on the 3-day Litecoin price:
The pattern currently forming in the 3-day price of the cryptocurrency | Source: @ali_charts on X
From the chart, you can see that the 3-day price of Litecoin has likely been consolidating over the past few months under a bear flag. However, after the recent crash in this asset, it appears that the price is finally breaking out of its downward pattern.
This drop in the coin’s value came as the rest of the cryptocurrency sector also took a hit in the form of a crash. However, unlike many other assets, LTC has never experienced a surge to start the year, so the decline was particularly damaging for it.
“After the recent decline in Litecoin’s prospects seems like a challenge,” Ali notes. “If selling pressure continues, LTC there could be a drop to $38, potentially confirming a bear flag formation.”
Generally speaking, breakouts from any flag pattern are about the same length as the previous pole, which is why the analyst chose this target. If Litecoin’s potential decline in value actually played out this way, the asset’s value would see its value decline by over 41% from its current price level.
LTC price
Just earlier, Litecoin was trading above the $73 level, but after an 11% crash, the coin’s price has now dropped to just $65.
Looks like the price of the coin has been moving sideways since the plunge | Source: LTCUSD on TradingView
Featured image by Kanchanara on Unsplash.com, charts from TradingView.com
