LTCUSD update: Price is cascading to bargain basement levels as these markets follow the extreme sentiment driving BTC. This is not surprising, since the short term bearish structures have been maintained. Instead of reacting though, this is a time to pay close attention since extreme prices offer rare and unusual opportunities for long term investors with courage and vision.
Extreme Means Emotional
When large bear candles appear at a major low, it is often a sign of the weakest of weak hands letting go of their coins. Presently, the 71.80 level is the most relevant reversal zone boundary and a very extreme price. And as you can see, there is a large range candle that established a low of 73.29. And it may be closing as a pin bar which is a bullish reversal sign.
As BTC slides, this market is overreacting in my opinion. BTC was below 6K, but it can go as low as the mid 5600’s or even the high 4900s before providing some evidence that weakness will continue over the long term.
Which means LTC is being pushed much further than it should be. Andrew noticed this unique discrepancy also and wrote an article about a creative way to capitalize on it which you can read here.
Listen To Common Sense, Not People
There is so much noise out there, screaming for everyone’s attention during these dramatic moments. Every level of media producer is going to be looking to capitalize on this situation in terms of eye balls. They are not really offering any information that will help.
The only sources of information that offer any value are your charts and your common sense. At extreme lows, like LTC at 73.39, probability or potential that price will continue lower is dramatically reduced. The reason is at extreme prices, whether it is a top or bottom, the herd exhausts itself. Once the weak hands are out, there is no one left to sell (in a figurative sense). And that is what is happening in this market especially around the 71 level.
In terms of sentiment, we are at the polar opposite of when these markets were at their peak. Nothing on your chart will tell you this. Only common sense and familiarity with best practices. The key is to think like a lone contrarian, not a member of the herd.
Two Ways To Play
Technical structures in this market are still bearish and will remain so for an unknown time. The bearish trend line around the 90 level needs to be taken out, followed by the 117 resistance level (adjusted .382 of the recent bearish swing).
The aggressive way: If you are a strong hand, or have not invested any money, now is a great time to get extreme low prices. Buying small is key because again, BTC still has room to go lower which means this market can reach very concerning levels. Keep in mind, a close below the 71 reversal zone boundary will prompt us to stop any further buying until proven stability returns.
The conservative way: Like many, you have aggressively invested much earlier and are waiting for these markets to recover. These extreme lows still offer an opportunity, but before cost averaging your position, you can wait until the bearish structures are cleared. That means waiting for 117 to be compromised before adding.
Waiting for 117 to be cleared means you must sacrifice the extreme low prices that are available now, and much of the attractive prices leading up to the break. More “safety” or less risk does have an opportunity cost. Just like when you bet on a horse with a high pay out, it is a riskier bet. The horses with the low payouts are the favorites, which means they are the obvious picks and the majority of the crowd is betting on them.
It is not hard to see the fundamental value, or learn about it, it is just a matter of having the vision and the courage to embrace the risk. These aren’t horses, they are real technologies that solve real problems and have merit.
Avoid The Obvious
When everyone thinks the same thing, that means it is time to change. When the main stream media, your Twitter experts and your favorite bloggers are all saying the same thing, that is a reflection of the herd. This is no different than the shoe shine boy offering hot stock tips 100 years ago. Or your mother sporting the same hair style as you.
Whatever you decide, do not take action as a result of someone else’s opinion. If you have the money to invest and can afford the risk, these are opportune markets for strong hands. If you are all in and are waiting for recovery, that’s okay too, just watch and learn. Either way, this is the worst place to be converting coins back to dollars. It may be ugly, but the ugliness of the lows is where the opportunities are, not in the glamour of the highs.
Questions and comments welcome.