Trade Recommendation: Bitcoin Cash/Ethereum

The Bitcoin Cash/Ethereum pair (BCH/ETH) breached resistance of 2.20 on September 26, 2018. This triggered the breakout from the large symmetrical triangle pattern on the daily chart.

However, the breakout doesn’t look so convincing. On that day, BCH/ETH printed volume that’s only 79.62% higher than its daily average. What we’re looking for is a volume buzz that’s twice or even three times the daily average. Without this amount, the market is at risk of significantly correcting. We may see that in BCH/ETH.

Technical analysis shows that BCH/ETH is pulling back as bottom pickers take profits from the breakout. The good news is the consolidation is creating a bullish pennant on the daily chart. This is a pattern that suggests the uptrend is intact even though the price is dropping.

Considering that the breakout volume was a little thin, we expect the consolidation to take more time. More importantly, it is very likely that BCH/ETH would go below the breakout. This wouldn’t invalidate the breakout. On the contrary, it should give you the opportunity to buy cheap.

The strategy is to buy on dips as close to 2.00 as possible. The former resistance now serves as the support of the bullish pennant. As long as the market respects this support, BCH/ETH has the momentum to ascend to our target of 2.84.

The process may take more than a month.

Daily Chart of Bitcoin Cash/Ethereum on Poloniex

As of this writing, the Bitcoin Cash/Ethereum pair is trading at 2.3085 on Poloniex.

Summary of Strategy

Buy: Buy on dips as close to 2.00 as possible.

Target: 2.84

Stop: 1.90

 

Disclaimer: The writer 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.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.