Litecoin Price Primed for Rally Following Falling Wedge Breakout

Litecoin (LTC) is showing strong signs of a potential rally, having recently broken above a significant falling wedge pattern. This breakout, combined with supportive on-chain metrics, suggests a bullish trend may be on the horizon for LTC.

Technical Analysis

On Monday, Litecoin's price broke above a falling wedge pattern that had formed by connecting the swing highs and lows from mid-March to mid-July. This technical pattern is typically indicative of a bullish reversal. Following this breakout, LTC traded 1.36% higher on Tuesday, reaching $73.34.

The key level to watch is the upper trendline of the falling wedge, which is now acting as support around $69.91. If LTC can hold above this level, it could potentially rally 10% from here, targeting the next resistance level at $77.33.

On the daily chart, both the Relative Strength Index (RSI) and the Awesome Oscillator (AO) are positioned above their neutral thresholds, further supporting the bullish outlook. For the momentum to continue, these indicators need to remain above average, adding strength to the ongoing recovery rally.

Breaking past the $77.33 resistance could pave the way for a further 18% rally, aiming for the $91.49 level. This target aligns with the 61.8% Fibonacci retracement level, drawn from a swing high of $112.80 on April 1 to a swing low of $57.01 on July 5.

On-Chain Metrics

On-chain data supports the technical analysis. According to IntoTheBlock's Global In/Out of the Money (GIOM) indicator, nearly 700,390 addresses accumulated 9.17 million LTC at an average price of $69.57. This makes the $67.76 to $72.06 range a critical support zone. If the price retraces to this level, these investors are likely to add to their holdings, reinforcing the support and potentially driving the price higher.

The Network Realized Profit/Loss (NPL) metric from Santiment provides additional insights. This indicator calculates a daily network-level Return on Investment (ROI) based on LTC's on-chain transaction volume, effectively measuring market sentiment. Strong spikes in NPL indicate that holders are selling at significant profits, while deep dips suggest panic sell-offs and capitulation.

In Litecoin's case, the NPL indicator showed a significant spike from 237,220 on July 14 to -5.25 million on July 15. This massive negative downtick indicates that holders were realizing losses, suggesting panic sell-offs and capitulation. Such capitulation events often precede bullish turnarounds as weak hands exit the market, making way for stronger, more confident investors.

Conclusion

Litecoin's recent breakout from the falling wedge pattern, coupled with supportive on-chain metrics, suggests a promising rally ahead. Key levels to watch include the support around $69.91 and resistance at $77.33. If LTC can break past the $77.33 level, an additional rally to $91.49 could be in the cards.

Investors should keep an eye on the RSI and AO indicators to ensure they remain above their neutral thresholds, signaling sustained bullish momentum. Additionally, the $67.76 to $72.06 support zone is crucial, as it aligns with significant on-chain accumulation levels.

Overall, Litecoin appears poised for a significant move upwards, provided it maintains key support levels and the broader market conditions remain favorable.

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