Technical Analysis and Market Entry: Bitcoin Cash (BCH/USD)

  • The Bitcoin Cash (BCH) price is subject to a further move north after a small consolidation period comes to an end.
  • BCH/USD price action has formed a bullish pennant pattern formation, subject to a breakout to the upside.

The Bitcoin Cash price over the last three sessions has been cooling, resulting in a loss of over 9% within the mentioned period. It has been moving within consolidation mode after a decent run higher that came into play at the very start of April. A significant surge in volume was observed from 2nd April to 3rd April, which saw the price rallying to a high of $363. The noted level was the highest reached since 19th November, when the market was within a steep bear market.

Full Reversal Well Under Way

Before we go into the key technical levels of observation, it is first worth recapping the steep drop that BCH/USD encountered towards the back end of 2018. The price fell a whopping 88% from $633 on 6th November, down to a yearly low at $73.50 on 15th December, where it bottomed. Since the price has recovered some 300% from the noted depressed levels. Bitcoin Cash is clearly on a stable path to recovery, as the bulls set sights on pre-November fall territory.

Bullish Pennant Pattern

BCH/USD daily chart.

After the noted rally at the start of April, which saw BCH/USD jump around 115%, the bulls have taken a brief rest from the upside pressure. During this consolidation period, the price action has formed a bullish technical structure. A pennant pattern formation observed via the daily chart view, which is containing the price at present. The bulls are subject to resuming their aggressive move north by breaking out to the upside from the pennant.

The rejections seen are a positive sign for the bulls, as they are further confirmations of the detailed structure. Another sign of an imminent breakout is the narrowing in price action; this is gradually occurring each session. Typically, this type of behavior tends to lead to a strong surge of volume and momentum. A strong buy signal should present itself upon a daily breakout and closure above the pennant.

Key Technical Levels

Immediate resistance is observed at around $325; the price had recently rejected the upper acting trend line between 15-16th April sessions. Further to the upside, the high print seen on 3rd April up at $365 will be watched. It is also the very start of a huge supply zone, which runs from that $365 area up to $410. The noted region is where the price had consolidated briefly in a choppy fashion, between 15-18th November 2018. It was seen before the strong wave of selling pressure came into force, resulting in a considerable free-fall.

In terms of support, this can be immediately seen between $280-$275 area, which is where the lower acting trend line of the pennant is tracking. Should the bears managed to force a breakout here, then eyes will be on a demand zone seen just below. Buyers would likely come into force down from $250 to $215 range, as this in the past has acted as both supply and demand. If this then fails to provide support, then a complete reversal of the recent recovery will likely be seen.

Trade Recommendation

BCH/USD daily chart, long trade eyed.

Look at possible long entries, upon a daily breakout and closure above the upper acting trend line of the pennant, $325. The first target will be the $400-10 price range, well within the noted supply zone. Stops would be placed just below the lower part of the pennant at around $275. Further buys could be eyed upon a successful breakdown of the first take profit area; the price may be forced to consolidate before another push north. An additional target eyed up at around $560-$570 range, where the next area of supply can be seen.

Entries could be taken upon another retest of the lower acting trend line of the pennant, with the scope of a breakout to the upside. Buys could also be placed upon a breakout and then retest of the noted technical structure, which would be around the $325 to $320 range. It must hold as support and if it fails to do so, then the trade may be off the cards. In terms of all described for validation of trades, then pennant pattern must be respected either way. Otherwise, the eyed long trades would no longer be seen as valid.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Author:
Ken has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.