LTCUSD: A Break Of 232 Is Beginning Of Wave 3?

LTCUSD update: Price action is still consolidating around the 210 level which is building a larger higher low formation. Following the lead from BTC, the price action in these markets are pointing to further strength. The more time they spend trading horizontal often leads to a more sustained move once price breaks out which puts the 300 area within reasonable range.

Consolidations like the one unfolding in this market are important to recognize especially because of the where it is appearing on the road map. The structure serves as a broader higher low formation and offers a number of opportunities to participate before the next leg breaks out.

In terms of Elliott Wave, this formation can be counted as a subwave 2, which means IF the overall bullish structure continues within the impulse configuration, then the next bullish break out is most likely subwave 3. Wave 3's are never the shortest wave, which means even if it turns out to be equal in length to subwave 1, that makes the 312 boundary of the 269 to 312 resistance area (.618 of recent bearish structure) a reasonable target over the next couple of weeks.

Price needs to close above the 232 level decisively which means no long wicks during the break out. I would also consider a break and close above 226 as an earlier confirmation of strength since price would be pushing through the minor bearish trend line at that point.

The questions always are: where do you buy and what can go wrong? IF this markets pushes 226, that is a more aggressive buy trigger in my opinion because it still has to clear the 232 swing high before breaking free of the consolidation. Breaking 232 offers more confirmation that momentum is driving price higher, but you will have to accept a larger loss if the move is a fake out. What can go wrong is a bearish catalyst can surprise the market and scare price back to the 186 to 138 support zone (.618 area of broad bullish structure).

In summary, as I often write, your outlook and risk tolerance play key roles in how you manage the kind of opportunity that this market offers at the moment. You must first consider what kind of time frame you want to participate, and then weigh the risks against the potential rewards. Everyone wants to be in for the big move, but no one wants to face the larger risks, which come in the form of deeper retraces than expected. This is why I emphasize, if you can take the loss without batting an eye lash, then you become immune to the random curve ball that the market can throw at you. This strong hand can be accomplished by appropriate position sizing which is often frowned upon by participants with small accounts, or who are driven by greed, or both. By default, chances of success in the game of speculating or investing in any market are weighed against us just based on our own psychological wiring, not mention other factors like costs and slippage. This is why it is so important to make decisions based on risk first, then consider the relative reward, not the other way around. And risk management begins with how well you know yourself.

Questions and comments welcome.