Technical Analysis and Market Entry: Bitcoin Cash May Be Forced to Retest 2019 Lows

  • Bitcoin Cash’s price is moving within consolidation mode but remains vulnerable to further downside risks. BCH has fallen as much as 50% since the back-end of June, with the bears firmly in control. 
  • BCH/USD price action has formed a bearish pennant structure, subject to a breakout south.

BCH/USD: Recent Price Behavior

The Bitcoin Cash price remains within the control of the market bears, despite them taking a break from the recent selling. BCH/USD is moving very much within consolidation mode, which has been the case since 15th July. The sideways trading came into play following the harsh pressure from the sellers that commenced late in June and carried well into July.

BCH/USD dropped as much as 50%, from $515 down to $253, as the price reversed the May-June bull run. The bears had forced a breach from an ascending channel formation seen via the daily chart view. It was supporting the price from the middle of May until the sellers forced a breach on 30th June. The lower acting trend line gave way to the bears, which left the door open for the bears to further capitalize.

During the period of consolidation, price action has been limited to the upside; a huge daily resistance barrier should be noted at $326. The mentioned level has served as both daily support and resistance, proving to be tough acting. BCH remaining below this price area keeps the market bears in control, opening the possibility of another potential drop south.

BCH/USD daily chart.

Bearish Pennant

BCH/USD price action during the noted consolidation period has formed a bearish pennant structure. Bitcoin Cash is subject to an extended move to the downside, should the lower acting trend line be broken. The noted support, which is holding the price for the time being, can be seen tracking around $300-$295.

Should the pennant be forced to give way by the bears, then the entire 2019 recovery could be wiped out. A breakout would likely open a fresh wave of selling pressure and momentum, which will call into action the next demand zone. A retest of the low for July will come into action, where the critical territory of support is tracking from $260 to $220.

Trade Recommendation

A short position from the current price area remains attractive, given the technical setup eyed via the daily view. Targets to the downside would be $230, $150 and then $120. Entry could be within the pennant structure; however, confirmation would be on a breakout and retest. Stops would be placed just above at $241, leaving enough breathing room in case of short-lived wicks above.

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.