Technical Analysis and Market Entry: Bitcoin Cash Subject to Big Breakout South

  • Bitcoin Cash has been recovering some of the steep losses that were encountered from the June-July period. 
  • BCH/USD has formed a bearish flag pattern, subject to a potential breakout south.
  • The next major demand area (support) to the downside is eyed between $120 and $80.

BCH/USD: Recent Price Behavior 

Bitcoin Cash has been moving within consolidation mode, gradually recovering some of the steep losses encountered. BCH/USD dropped from heights of $520, where it had been trading at the very back end of June. Prior to that, it had jumped to the highest levels seen since November 2018. The price then fell over 50% from the noted level on 28 June, down to $250 printed on 15 July. It was the lowest Bitcoin Cash had been since 2 May, when the price was in recovery mode at the time.

BCH/USD initially started 2019 in a powerful bullish manner, clear intentions of recovering much of the losses seen in 2018. Bitcoin Cash started the year down at $118; it had managed to gain some $335%, before running out of steam. During the latter part of the bullish move, between mid-May to late June, price action formed a rising channel structure. The breakout of this pattern pushed the door wide open for the bears to capitalize.

The price upon the above-detailed breach resulted in BCH/USD free-falling to the next major area of demand. In terms of the noted support, it runs from $250 down to $220. It has previously acted as both demand and supply. Before the most recent bounce on 15 July, Bitcoin Cash had found needed comfort here on 29 April. The price rallied convincingly after touching this territory, leading to the noted heights of $520.

BCH/USD daily chart.

Pump Before Dump

As earlier described, BCH/USD staged a rebound after the steep fall from June-July. Price behavior over the last four weeks (i.e., during this consolidation period) has formed a bearish flag pattern. Bitcoin Cash appears very much subject to a breakout south, given this technical structure. As an additional confluence, a rejection was seen at a supply area of $360 to $385, which has previously forced rejections.

Trade Recommendation 

Given the noted bearish flag formation, eyes are on a breakout to the downside. The sellers will need to force a breach of the lower acting trend line, tracking around $325.  Should the bears manage to capitalize on this structure, then a strong fresh wave of selling pressure will likely come into play.

Targets to the south are seen at $250, $200 and then the $120-$80 range.

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.

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.