Technical Analysis and Market Entry: Bitcoin Cash Wide Open for Bear Capitalization, Room for Another $100 Drop

Bitcoin Cash
  • The Bitcoin Cash (BCH) price is under selling pressure after the bulls ran into strong supply within the $500 territory.
  • BCH/USD has dropped some 40% over the last three weeks, as momentum shifts back into the bears’ control.

BCH/USD: Recent Price Behavior

Bitcoin Cash price pressures are heavily tilted to the downside following the complete loss of near-term upside momentum. BCH/USD from April to June enjoyed one of the best runs higher across the large-cap space. The price rallied some 212% from $166 up to the high print on 25th June at around $518.

Similar to some of its peers, between mid-May to late June, BCH price action was consolidating but maintaining elevated levels. The noted price behavior did form a pennant structure, which was set for the bulls to capitalize on. However, a false breakout occurred, sucking buyers in before dashing expectations and sending the price south.

BCH/USD daily chart.

Door Wide Open for Bear Capitalization

The bears recently managed to break down a critical area of demand, which was seen running from $385-$355. BCH/USD had not been in this territory since November 2018, when the market was well within the bears’ control. Buyers could be seen heavily defending and preventing it from being breached from May to the early part of July.

During the session on 11th July, the bears forced a sharp move to the downside; as a result, BCH/USD saw a daily closure below. The price falling and closing underneath the demand zone meant the bears could further capitalize. BCH/USD retested this zone in the following session on 12th July, failing to break back above and confirming room for further downside.

Another $100 Drop Until Safety

Given the above-described technical price behavior, BCH/USD remains vulnerable to another wave of selling pressure. The next area of safety is not seen until the $260-$230 price range, where it last traded in late April. BCH was able to attract strong buying momentum down at these depressed levels, which took the price on to its most recent bull run.

Trade Recommendation

The momentum for BCH/USD is largely tilted to the downside, with no signs of a slowdown just yet. Strong signs indicate further moves to the south are yet to come, given the breakdowns of a big demand areas. In terms of downside targets, $260-$230 is the next area to watch. If that fails to hold then a return down to $150 is possible. Stops would be placed just above the former acting buy area $385-$355. Setting the stop at $392 would leave enough breathing room.

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.

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.