Trade Recommendation: Bitcoin Cash

Bitcoin Cash has been on the receiving end of the bears. From its highs of $4139.0893 on December 20, the cryptocurrency plunged about 81% by February 06. This shows the kind of damage the decline has done to the buy and hold investors.

Key points

  1. Bottom fishing is seen in Bitcoin Cash.
  2. It is likely to change its trend from down to range bound.
  3. Buy $1,400, SL $1,100, target $1,896 and $2,070

However, smart investors start cherry picking when others sell in a panic. We believe that Bitcoin Cash is showing signs of bottoming out, hence, is worthy of a buy.

Daily chart

In the short-term, Bitcoin Cash is trading inside the descending channel. In the long-term, the cryptocurrency has a stiff resistance at the downtrend line. Additionally, it has stayed below the 20-day EMA since January 16. All these point to a strong downtrend.

However, the bears could not build up on the breakdown of the critical support at $854. Though prices fell to a low of $778.2021 on February 06, it quickly rebounded about 79% to $1392.5405 on February 10.

Since then, the virtual currency has been trading inside a tight range. This is unlikely to continue for long. We expect a large range move to the upside that will propel the BCH/USD pair above the critical resistance zone, which has a confluence of resistance from the 20-day EMA, the downtrend line and the resistance line of the descending channel.

Once above this zone, a rally to the 50-day SMA of $1,896 and above it to $2,070 is likely.

Therefore, we suggest initiating long positions on a breakout above $1,400. The stop loss for the trade should be kept at the recent lows of $1,100. Traders should avoid purchasing below the specified levels.

Featured image courtesy of Shutterstock. 

Author:
Rakesh Upadhyay is a Technical Analyst and Portfolio Consultant for The Summit Group. He has more than a decade of experience as a private trader. His philosophy is to use technical analysis for momentum trading and fundamental analysis for long-term positions. Rakesh likes to keep himself fit by lifting weights and considers himself to be a spiritual person.