Technical Analysis and Market Entry: Bitcoin Cash Vulnerable Following Pennant Breakout and Retest

  • Bitcoin Cash price vulnerable to further downside risks, once consolidation period passes.
  • BCH/USD broke out and retested a daily pennant structure, which has left the price vulnerable.

BCH/USD: Recent Price Behaviour

Bitcoin Cash price action is very much tilted to the downside, as the market bears maintain full control. The price is trading at its lowest levels seen in almost two weeks, following a critical support breach. BCH/USD was moving within a bearish pennant structure from July to September. Trading conditions during this period were very much narrow, a lack of committed trend.

The bears were able to capitalize on the pattern, forcing a breakout to the downside on 24 September. BCH/USD was forced to drop back down to levels last seen in April at $209, before bottoming out. It was within a known area of demand, which is key reasoning for the stabilization. The price then went on to retest the structure between the 29 October to 8 November, which led to rejections. It marked a successful breakout and retest of the pennant.

Weekly Chart View

Price action via the weekly had been on a strong run to the upside; it was initially running at six consecutive weeks of gains. However, a rejection at the pennant saw a weekly evening start candle close. Technically, it does indicate a change in trend in on the horizon, which saw the bears following up with selling. The price at the time of writing is running towards its second consecutive week in the red.

BCH/USD weekly chart.

Bitcoin Cash Network Upgrade Successfully Completed

The Bitcoin Cash network recently completed an upgrade of the latest ruleset changes to the protocol. The BCH blockchain now features the enforcement of minimal push data in the script which will allow for a majority of BCH network transactions non-malleable. Additionally, as an extension to last May’s Schnorr upgrade, the opcode OP_Checkmultisig(verify) now features Schnorr signature support.

Bitcoin Cash (BCH) developers every six months perform an upgrade to the network, as part of enhancing the BCH roadmap. It does aim to scale peer-to-peer electronic cash to the masses. BCH protocol developers have so far raised the block size to 32MB, re-enabled the Satoshi opcodes, implemented OP_Checkdatasig, added Canonical Transaction Ordering (CTOR), and the foundations of Schnorr signature support.

Trade Recommendation

Given the breakout and retest of the noted pennant structure, further downside pressure still eyed. BCH/USD bears recently cleared a daily support area at $272. The ideal entry would be on another retest of and entry at $272. The other option is waiting for a breakout of daily support at $238, for shorts. Targets to the south are; $210, $175 and then $160. Stops at the entry of $272, would be placed at $280. For the entry at $238, then stops would be placed at $245.

BCH/USD daily chart.

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.