Looking like it would head lower towards $850 (Nov. 17 low) earlier today, bitcoin cash instead regained the bid tone and rallied as high as $1,550 before trimming gains. The world’s third-largest cryptocurrency by market value was last seen trading in the $1,450 neighborhood, as per data provided by CoinMarketCap.
Bitcoin cash (BCH) is well bid today, but a close look at the numbers indicates the positive move could be deceptive.
Prices dropped for the third straight day yesterday, signaling a transient victory for the bears in the ongoing tug of war with the bulls.
So, was yesterday’s breakdown a “bear trap,” or is the positive price action seen today a case of “bull trap”? Only a close today (as per UTC) above $1,545 (161.8 percent Fibonacci extension) would be bad news for the bears.
According to the price chart analysis, though, the odds of that happening are low.
Bitcoin cash chart
The above chart shows:
- Bitcoin cash suffered a downside break of the rising channel (marked by blue channels) and a bearish symmetrical triangle breakdown yesterday.
- The relative strength index (RSI) fell below 50.00 into bearish territory yesterday, possibly signaling more losses ahead.
- BCH ran out of steam at $1,545 earlier today and fell back to $1,350 levels.
- The decline from $1,545 to $1,350 also marks a failure to hold above the 5-day and 10-day moving averages (MA).
- Further, the 5-day MA and 10-day MA are sloping downwards in favor of the bears.
Further, the market usually crowds out weak hands (bear or bull) following a major move in prices.
The observed bearish rising channel breakdown and a bearish symmetrical triangle breakdown both indicate a bullish-to-bearish trend change – i.e. the rally from the October lows below $300 may have topped out.
And the move higher seen today could have taken out the weak hands – i.e. bears with tight stops (and, hence, low-risk tolerance).
- Chart analysis suggests bitcoin cash is more likely to break below $1,280 (rising channel support) in the next 24–48 hours and confirm that today’s spike was a bull trap. Prices could then test support at $850 (Nov. 17 low) in the short-run.
- On the higher side, only a close (as per UTC) above $1,545 would revive the bull run.
Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.