As mentioned before in our chats (Telegram and on Twitter) Bitcoin Cash still has the latent potential to continue increasing in price despite the enormous gains that it has accumulated in the past 24–48 hours.
Let’s briefly check out a chart that shows its most recent price action:
As we can see from the chart above, Bitcoin Cash has gained approximately 37.5% in that time span.
Naturally, in a market that has exhibited as little volatility has cryptocurrency has over the last few weeks, such price action is going to draw a lot of attention — and rightfully so.
In the top 10, Bitcoin Cash was one of the lagging performers, in terms of price action.
Why the Sudden Increase?
Many will attribute this to the impending ‘hard fork’ that will occur on the Bitcoin Cash protocol in approximately 10 days (November 15th, 2018). However, the primary reason is probably due to the fact that Binance recently announced that they will be providing support for said hard fork on their exchange.
In addition, Coinbase (a major U.S. crypto exchange) has also announced their support for the fork as well.
What Does This Mean?
In a nutshell, in their announcement, Binance and Coinbase are publicly affirming that they will credit users for Bitcoin Cash following the hard fork.
Bitcoin Cash Price Analysis
The number one question on most traders’ minds in the crypto markets currently wrt Bitcoin Cash = ‘Can I still continue to make a profit from this move?’
The answer = Possibly.
Let’s check out that chart again (on the daily resolution).
You’ll notice on the chart above that a number of trendlines (horizontal and diagonal) have been drawn on the chart to document resistance/support points as they have occurred over time.
Let’s simplify this chart though, and build from there.
Long-Term Downtrend Resistance Broken for the BCH/USD Pairing
In the chart above, we can see that the long-term downtrend resistance for the BCH/USD pair, which spanned back to early June, has finally been broken.
The pink boxes on the chart above were placed to signify all of the times that the resistance had been tested.
As expected, when a downtrend resistance of this proportion has been broken, there is typically major price action to follow this break.
Mapping Out Support/Resistance Points
The chart above accurately describes the price’s interaction with the overhead resistance points that it faced earlier.
As noted above, the resistance at $500-$510, which was a resistance, will now become a support.
At this point, the price is currently testing its current resting point as a viable resistance. It can either remain there or break down to test a lower support point (upon exhaustion of the run).
Given the reason behind the mass influx of buying on the protocol, it is not expected that there will be a massive wave of selling until purchasers have been able to ensure that they will be granted their tokens from the impending chain split in a few days.
Relative Strength Index(14)
When looking at the RSI(14) above on the daily chart, it appears as though the price is already overextended (in the overbought region). However, it is worth noting that the RSI(14) will react in such a way if there has been a period of prolonged sideways movement followed by a sudden, unexpected bump in the price because of the underlying calculation of the RSI(14).
Thus, this dramatic rise is to be expected, but the outlier data makes this metric a bit less reliable because it is not calibrated to process extreme price movement like this whilst still remaining a viable indication of overall price action in the immediate context.
RSI(14) on the 3-Day Chart
Given the short lifespan of Bitcoin Cash, it isn’t really feasible to use the weekly chart at this point.
However, the 3-day chart is a more than viable resolution for ascertaining the overall price momentum without as much ‘noise’.
Major Divergence Alert
From just a cursory glance, we can already detect where major divergence was taking place on the RSI(14) for the 3-day chart.
In addition, from the chart above, we can detect a confirmation of continued momentum (potentially over the next few days) for Bitcoin Cash.
Let’s go ahead and move back to the chart (daily resolution) and see where the exponential moving averages (EMA) provide us support and resistance.
Exponential Moving Average
From the chart above we can note a few things:
- The EMA-100 is serving as a cushion (support) for the price.
- The EMA-50, EMA-12, and EMA-26 have all been broken.
- The EMA-200 is serving as an overhead resistance far above at the $688 price mark.
- The EMA-12 has crossed above the EMA-26 and appears to be on the precipice of doing so for the EMA-50 (positive signs).
The next realistic overhead target for the price of Bitcoin Cash lies at $610.
The current recommended R/R idea for this trade is as follows:
Disclaimer: As always, nothing in this piece is meant to be construed as financial/investment advice as it is not. The author is not currently invested in Bitcoin Cash or any of its potential competitors.