LTCUSD/BTCUSD - BEARISH CYCLE STILL IN PROGRESS by DanV on TradingView.com
24 February 2015
Whilst I have shared this spread chart of LTCUSD/BTCUSD several times over the last 18 months or so, I have not directly published this as a main chart.
However, as requested by quite few Crypto traders, I feel it is appropriate to so.
This spread charts like any ratio charts can help to gauge potential trend change, but it must be used with care. Since what you are doing is looking at price behaviours of one instrument against another similar instruments in the form of price ratio.
When this is compared with the actual price of the 2 instruments concerned, it would be observed that during the bullish cycle the riskier of the 2, tends to lead to the upside and also during the bearish cycle to the downside.
Logic behind this is that, in rising market traders are willing to take on higher risk for potentially higher return, in doing so they tend to buy instrument that could give them potentially higher return but which also exhibit higher risk profile.
In my experience, this types of relationships could be observed in ratio charts of SP500/Dow Ind, Silver/Gold etc,. Similar ratio analysis is very powerful part of intermarket analysis and could give advance warning of potential trend change or help to confirm it.
Ration analysis could be applied by anyone interested in adding unique perspective on major trend analysis. I covered this topic in details during a relatively long live session which you could view on Youtube.
However, caution needs to be exercised as the ratio chart could have potential trend change whilst both the base instruments might still be continuing the trend, except one might move less than the other and temporarily consolidate. On resolution of this it might continue in the existing trend. Nevertheless, strength and weakness are often seen first in the ratio chart.
In this instance both LTCUSD & BTCUSD formed major all time high in Nov 2013, which was accompanied by corresponding high in the ratio chart.
Applying similar technical analysis on ratio chart as applied on the base instruments, it is evident that the ratio chart has continued declining along with them.
Elliott Wave analysis on the ratio suggests, that this ratio chart has some way to go before completing this cycle. Cross checking the ratio chart with the based instrument's respective price charts, it might be possible to get heads up when this bearish cycle or phase is near completion.
Once the low is formed, both the base instruments too would have or be close to posting similar price lows but it might not be the final low in the sense that this might be just the larger cycle wave A from Nov 2013 high and any price progressions to the upside might be retracement. Just a thought to keep in mind at this stage.
As always, do your own analysis for your trade requirement.
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Thank you for taking the time to read my analysis.
DanV