Another Great Breakout Trade
Litecoin finally broke out from a bull wedge pattern it has been forming over the past few days. As with this post, I'm going to discuss here how I traded it!
First, the bull wedge pattern is one of the more popular bullish indicators. Just like the bull flag pattern discussed in the previous post, this formation tends to indicate a breakout is near. As the name imples, our sentiment is bullish, though we must caution that a breakout is expected either way (to the upside or downside).
For more confirmation, we again turn to my technical indicators. I was able to determine that the long term momentum (blue line) was strong, but the short term momentum (purple line) had let up for a bit. Again, momentum must always revert to the mean, so consolidation is anticipated at some point. So my sentiment toward LTC was extremely bullish, I just had to look for an entry opportunity.
For an entry opportunity, I turned to the lower bound of the wedge formation. I basically set a limit order on where I anticipated the price would touch this trend line, at about $163.54 (I never use round numbers. More on this in a future post). As anticipate the price reached my limit order, and I entered the position. As anticipated, we saw the wedge breakout, and I'm HODLing until $170's.
To recap: we combined three facts to make this trade:
- Overall bullish conviction to cryptos
- Bull wedge pattern
- Bullish signal from the Kovach Momentum Indicators