The analysis for today’s article is focused on a chart style known as Point & Figure. According to this chart style, Litecoin (LTC) is very close to a breakout higher.

The above chart is a chart style known as Point & Figure. Point & Figure may not be as familiar to new traders and analysts as Japanese Candlesticks, but Point & Figure is regarded as the oldest form of charting in existence. Point & Figure charts differ from Japanese Candlesticks in that there is no time factor involved. Point & Figure charts can often be called ‘Price Action’ charts. For traders who enjoy price action trading, there is no chart form more pure for price action trading than Point & Figure. Price & Figure charts are constructed by determining a box size and reversal amount. The box size is determined by the unit of measurement you are using (ticks, points, pips, etc.). Xs represent prices moving up, and Os represent prices moving down. Columns change from X to O/O to X when the reversal amount is met. For example, the current chart will print a new column of X’s when price moves three boxes above the lowest O – which would occur at$54. For Litecoin’s chart, I am using a 1×3 Point & Figure Chart ($1 per box, three-box reversal).

One of the great benefits that Point & Figure charts provide is the unambiguous nature of its rules. Trendlines are drawn from only one point and from one column to the next. These are known as 45-degree trendlines or objective trendlines. Another difference between Point & Figure and Japanese Candlesticks is the frequency (or infrequency) of trend changes that occur. Point & Figure charts are always in a bull market or bear market. The objective trendlines determine that trend. For Litecoin’s current chart, the dominant objective trendline is the furthest downtrend line. Because we are looking at a bear market, we only take short trades. However, there is a condition on this chart that may give cause to go long instead of short.

Continuing with the unambiguous nature of the Point & Figure chart style are the entry rules. Trades are only taken when multiple tops and bottoms have been broken. On Litecoin’s chart, we can see a double top has formed with two Xs at $64. This means if Litecoin can return to $64, then not only will a new column of X’s have developed, but a potent multiple top will have formed as well: a triple-top. Triple tops are by Dalquist and Kirkpatrick as the most profitable multiple top pattern. When a breakout of a triple-top occurs, it is often a very powerful and violent move. It is for those exact reasons why I believe a short continuation trade is not a trade I will be taking. I am currently on Litecoin at these levels, and I am anticipating a significant move higher if the breakout of the triple-top does occur. Price breaking above the objective downtrend line will create a new bull market at the same time a potent top has been broken. Litecoin will more than likely create substantial gains when this level is broken.