Bitcoin Cash Surpasses $575 as Bulls Defend Critical Support Levels
Market Pulse
- Bitcoin Cash is one of the very few major cryptocurrencies that not only maintained its early December floor and low, but was actually able to climb further up.
- Its monthly low was 1.8% above the early December low at $465, and its monthly high was 14.3% higher than its early December high at $563.
- The most recent Guru Strategy Report pointed out that taking out the monthly high was almost a sure thing, and that’s exactly what BCH did this past week.
An inflow of buyers pushed the currency to $573.90, its highest value since July. The report also mentioned that the resolution of this trading range (between $563 and $465) would probably be to the upside, as BCH has a history of going on a big run once it breaks out of a trading range.
Bitcoin Cash recovery in the last month saw its price increase by 14.3% to $577.88. Trading volumes exploded during the breakout confirmation, helping reverse the majority of the past six months’ 45.8% gains. Price action is now testing areas of resistance that haven’t been breached since the summer highs near $607. The psychological $550 level and the aforementioned resistance cluster between $590 and $607 are key to this market sustaining its upside progress.
| Metric | Value |
|---|---|
| Asset | BITCOIN CASH (BCH) |
| Current Price | $577.89 |
| Weekly Performance | 6.25% |
| Monthly Performance | 14.32% |
| RSI (Relative Strength Index) | 58.5 |
| ADX (Average Directional Index) | 20.6 |
| MACD (MACD Level) | 13.06 |
| CCI (Commodity Channel Index, 20-period) | 165.89 |
Momentum Cools From Monthly Highs Without Capitulation Signal
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. RSI oscillates between zero and 100. It is most commonly used to identify overbought or oversold conditions. A reading above 70 is considered overbought, which can be a sell signal. A reading below 30 is considered oversold, which can be a buy signal.
What is interesting to note is the performance of RSI during the volume surge confirming the breakout, it went through 70 rather than showing any divergence, indicating that the breakout was due to real accumulation rather than a short-squeeze. Hence for swing traders, this fairly balanced RSI reading hovering around 58 will be an ideal setup for entering longs. ESPECIALLY with the Web3 security scare surrounding October’s $45.8M losses already factored in and now slightly in the rearview mirror.
ADX at 20.58 Signals Consolidation Before Next Directional Move
When it comes to the Relative Strength Index, or RSI, its reading currently stands at 52.49 since the recent decline allowed the uptrend to appropriately consolidate. This momentum oscillator registered overbought conditions for most of July and August, so it was comforting to see RSI around 50 again.
Simply put, the ADX suggests that we’re shifting from trending to boundary conditions – which is to be expected following a 14% monthly rally. This kind of environment tends to suit range traders best as they look to exploit the parameters bounded by the $530 support and $590 resistance levels, while day traders will want to adapt their approach and concentrate on mean reversion opportunities as opposed to momentum breakouts until the ADX pushes back above 25 and marks the commencement of the next trending phase.
50-Day EMA at $530 Transforms From Resistance to Critical Support
The high volume breakout with a moving average retest could fuel BCH through another technical level near $600 which acted as resistance in early November. Increased volume on the subsequent uptrend would also help to support the bullish continuation.
Even more telling is the compression between the 100-day EMA at $530.86 and the 50-day at $530.61 – extremely compressed moving averages like this often lead to very powerful support confluences for the trend. The 200-day EMA is far below at $511.19, giving a floor about $66 below the market. The former resistance zone at $530 is now a red line for the bulls to hold, particularly with the Bitcoin fork dramas potentially causing some spill-over worry that might test this support.
Resistance Stacks Between $590 and December’s $607 Peak
Sellers have stacked orders above the current price in the $590-$607 zone. Here, December’s monthly high of $607.24 forms resistance both from a psychological level and by the upper limit of the six-month trading range. This zone blocked the bulls’ attempt to advance twice in early December, before the recent correction acted on it. This is the key level bulls need to overcome, to indicate the continuation of the following uptrend. If the buyers manage to go through this cluster of resistance, the monthly R1 pivot at $639.77 will represent the next significant target.
Bulls are defending several layers of support under the current price, the nearest of which is the weekly pivot at $527.01, a level that’s in close proximity to the 50-day EMA support at $530.61. The area between $516-$530 also represents the confluence of the monthly pivot middle at $518.52 and the psychologically important $520 level, which has served as solid support in previous pullbacks. This level has been tested on six occasions since the breakout volume pump and has never been breached.
The same logic holds for longs targeting $791.11, which if not reached by October 5th, will be likely terminated ahead of the FOMC Minutes Recap the following day should the monthly R1 at $674.32 fail as pivotal support.
Bulls Require Decisive Close Above $607 to Confirm Next Rally Phase
If the price is able to reclaim and hold above $607 then our first PT is $680-$700 based on the measured move from the cup-and-handle formation that’s been in the works since October. Bulls require this breakout to occur as the ADX moves back over 25 confirming trend resumption, as well as the positive exuberance derived from “volume surge signals start of new bull rally” narrative to provide the fundamental catalyst for continued buying.
The bullish breakout remains intact and can resume as long as BCH stays above the support confluence and the 50-day EMA. Bulls need to see another move above the crucial $550 level, which would signal a successful retest that opens the door for a rechallenge of $600. A break above that level would confirm the 2-year base breakout and establish the necessary momentum for buyers to overcome the dwindling supply of sellers and drive prices much higher.
Based on the technical setup and subsequent spike in volume, it is likely that BCH consolidates in the $550-$590 range for yet another week before another challenge of the $607 resistance area is made. Momentum indicators have reset, volume remains solid on the breakout, and there are various levels of support underneath making the consolidation a non-bearish pattern and not a distribution cycle as some on CT are saying. For those willing to wait for the consolidation to complete, before making their next move, the above risk-reward should be attractive.
