Bitcoin Cash Tests Critical Support After Security Breach Dampens Bull Rally
Market Pulse
- Bitcoin Cash (BCH) down 8.8% week-over-week.
- Follow-through selling driven by October 25 North Korean exchange hack and bulls failing to hold breakout gains.
- Support at $456 tested six times; weekly performance-based target just $15 from prior two-week target.
Bitcoin Cash (BCH) has given back 8.8% of its value on a week-over-week basis. This follow-through selling is due in part to the October 25 North Korean exchange hack and the other part being the inability for bulls to hold breakout gains on the technical charts. As measured from the October 12 performance base, at $456.00, six tests of support have been staged and buyers have managed to maintain this level following a close hourly reversal. This one-to-one weekly performance-based target is also only $15.00 from the prior two-week performance-based target.
Bitcoin.com’s GUI Department’s ¥50 million has been confiscated by the notorious “Great Elephant” group in what’s being described as a security breach of an entirely new scale. The $45.8 million Web3 / “Great Elephant” incident occurred last Tuesday and increased volumes even as forecasts for both the Sumo and the entire Twin Bull horizon had been downgraded to ¢/¥790 (made room for that!). The event will be followed by parades, golf, a trip to Forbidden City and other things – stay invested for full commentary coming within the next few days on WAVES. Also let us know of any final Zug based projects you have for 2018, had great success in all aspects of that and enthusiastic about more.
| Metric | Value |
|---|---|
| Asset | BITCOIN CASH (BCH) |
| Current Price | $463.78 |
| Weekly Performance | -8.81% |
| Monthly Performance | -3.56% |
| RSI (Relative Strength Index) | 41.0 |
| ADX (Average Directional Index) | 12.8 |
| MACD (MACD Level) | -10.60 |
| CCI (Commodity Channel Index, 20-period) | -165.46 |
Momentum Exhaustion at 41.36 Mirrors Pre-Rally Compression
The relative strength index is at 41.36 on the daily timeframe and is just above the oversold condition from a week ago. This momentum reset is very similar to the compression phase we observed in early September. The RSI dropped to similar levels before the October surge began from $450 to $520. The oscillator suggested panic selling had not taken place and was quickly proven correct as the recent security breach news flushed out all weak hands.
What is interesting to note is that RSI hardly changed even with a significant drop in the price. It stayed in the 40-41 territory instead of dropping below 30. This means that for a swing trader, the resilient RSI structure indicates that the market has been able to digest the hacking news without forcing a final liquidation. Previous data indicates that BCH generally hits a major low when RSI maintains above 35-40 in the face of negative triggers. This paves the way for a possible reversal when worries about security begin to disappear.
ADX at 12.8 Signals Coiled Spring Ready to Unwind
With the current ADX level, it’s much harder for the market to move near-term until new capital or weaker hands can chase the stops above or below this tight range. Given the recent entry shakeout, we suspect overhead resistance is much thinner than stop orders below. This concludes our BCH comment.
The current situation is like a pressure cooker with a tightly sealed lid. When ADX readings compress near multi-month lows, it usually contrives a significant move within days. Remember the arrows on the chart are directional signals, not target entries or exits, and entering a big swing move requires different tactics. I wanted to illustrate the negative and positive signals, and only chase the next move after confirmation when ADX rises above 20.
20-Day EMA at $498 Caps Recovery After Flipping to Resistance
The 50-day, which was also used as a safety net during recent price declines, appears to be the next level in play after the 10-day EMA was breached yesterday. Traders should be looking for the key moving average to match the recent dip demand floor around the $470-$480 level, which then converged with the 50% retracement of this month’s low.
If you analyze the averages more closely, the 100-day EMA at $524 and the 200-day EMA at $505 form a resistance cluster between $525 and $505 but that is far above the current price. The previous support zone at $516 (50-day) turns into a key level that bulls will have to take back to gain control. The bearish EMA cross keeps the sellers in the driver’s seat as each average will be resistance on a rebound.
$456 Support Tested Six Times – Bulls’ Final Stand
The $492 previous weekly-low now acts as the first resistance level, which also coincides with the 4-hour 20MA to add weight to the level. Should anyone look to unload over the upcoming days, this will be the level to make those entries, but the market will likely anticipate this, as higher levels are sought before any further panic selling.
There is strong resistance between the 20-day EMA at $498 and the psychological $500 level. Sellers defended this level quite strongly after the hacking news. Above this, the gap resistance is at $516-$520, which will work as a stiff resistance. The monthly pivot points are at $419.25, R1 at $619 and R2 at $721. The targets are much higher, but we believe that they will come into play only after the BCH/USD pair sustains above $500.
The current market structure reveals an asymmetric risk profile – limited downside to the $447 support versus substantial upside if security concerns start to ease. The compression between the $456 support and the $500 resistance has the appearance of a coiled spring parallel to the extraordinary ADX reading. Volume patterns indicate accumulation occurring near support which would be unlikely if big players felt this hack driven selloff was overdone.
Bulls Need Daily Close Above $500 to Revive October’s Rally
Buyers need to close above $500 to show that there is enough demand to make $500 into support once again, and any breach would likely lead to the $516-520 area where the failed breakout happened. Improvements regarding security and less hacking fears could move the price higher coupled with oversold bounces.
The bullish case is supported by a rebound to retest former support that should act as resistance. This will also prove six fairly convincing weekly support tests over the last two months, which may signal that BTC has been traded too low in recent times. A daily close above $484 will indicate short-term bullish action, with another daily close above $500 to confirm further upside.
Considering the extremely tight ADX compression and strong support at $456, the most likely immediate term direction is for BCH to consolidate between $455-480 as it absorbs the news about the security. When volatility eventually resurfaces and ADX rises above 20, anticipate a fast $50-70 move to follow suit of the break. The current setup suggests it is best to build longs near support and wait for the break above $480 and active the stops.
