Renowned technical analyst and founder of Bollinger Bands, John Bollinger, recently used Litecoin charts to illustrate important trading lessons for cryptocurrency enthusiasts.
The financial market expert recently broke his silence on social media platform X to answer repeated questions about two of his signature concepts: the Bollinger Band Squeeze and the Head Fake.
Bollinger used Litecoin’s historical charts to demonstrate that a common market pattern known as the Bollinger Band Squeeze can sometimes cause false breakouts called “head fakes.” .
Bollinger Bands Squeeze and Head Fake on Litecoin Charts
A widely used technical analysis tool, Bollinger Bands consist of volatility bands placed above and below a moving average. When these bands narrow, they indicate periods of low volatility known as “squeezes.”
Traders often expect large price movements following an upward or downward squeeze. But Bollinger warns that this prediction can be misleading.
On the Litecoin chart, the bands are visibly narrowing, suggesting a squeeze. This was especially evident in the price pattern that designed in late July when LTC was trading around $65.
Under pressure, Litecoin price briefly rose to $76.62, which may have led some traders to believe there was a bullish breakout. However, the move trapped traders who were hoping for a continuation.
Interestingly, John Bollinger himself commented on the LTC squeeze at the time, noting in late July that “it’s time for coins to wake up.” In fact, Litecoin rose 8% after his remarks.
However, the price quickly reversed and fell sharply. This is a classic example of a “head fake.” Specifically, LTC reached $76.62 and plummeted to $50.43 a few days later.
Litecoin chart by John Bollinger
Basically, this famous technical analyst used the Litecoin example to remind traders to be careful when interpreting squeeze signals. This highlights the importance of not jumping to conclusions based solely on the initial price movement after the squeeze.
A trading opportunity for LTC?
In response to Mr. Bollinger’s latest analysis, some commenters on X asked for insight into potential LTC price movements based on the current chart. Although no prominent analysts have responded, one commenter suggested that traders could consider buying LTC above $65 and selling at $75.
At the time of writing, Litecoin was trading around $64.19, but it has yet to fully recover from its sharp drop two weeks ago.
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