Bitcoin Cash: The Technical Price Action Behind BCH
Cryptocurrencies never sleep. They trade 24 hours a day, 7 days a week, meaning there is always some sort of action to what a trader’s appetite. This weekend was no exception and a tremendous amount of social media buzz was created when Bitcoin plunged by $1,000 in the span of 48 hours. This was not the icing on the cake, because as Bitcoin was plunging, Bitcoin Cash—an instrument dismissed by many—surged by 231.33%, creating quite the shock-and-awe moment, especially for those who dumped their BCH positions shortly after they received them.
Trading cryptocurrencies is not for the faint of heart, and I have discussed on many occasions that it pays to stay nimble and that defining one’s risk is a must. I may sound like a broken record, but nobody ever lost money taking a profit, and in this wild arena where a cryptocurrency can move in an unprecedented amount, it especially applies.
I am going to focus on the move in Bitcoin Cash because the price action has been outstanding, and for a technical analyst like myself, I couldn’t ask for anything more.
The move towards higher prices and the blow-off that just occurred this weekend should come as no surprise to those who analyze price charts. Since I am one of them, I will do my best to explain what just occurred.
The following BCH price chart illustrates a powerful technical price pattern that is shared among some of the best-performing assets.
Chart courtesy of TradingView.com
This Bitcoin Cash price chart highlights the previous all-time high that was set shortly after it spun off from Bitcoin. This level was revisited a week later, and it prevented Bitcoin Cash from advancing beyond it, establishing this level as a significant level of price resistance.
For the next few months, BCH began trending lower in a defined downtrend that contained a series of lower highs and lower lows. In mid-October, the price regained its footing and began trending higher. The price continued to advance until it broke above the previous all-time high on November 10. This set off a flurry of buying pressure and the Bitcoin Cash price reached a high of $2,750 before all was said and done.
Breaking a previous all-time high that was set shortly after an asset lifecycle began is a very special and powerful price pattern. This price action is shared among some of the best-performing names. This year, Shopify Inc (NYSE: SHOP) stock and Square Inc (NYSE: SQ) stock share this characteristic, but none are as famous as Facebook Inc (NASDAQ: FB) stock, making it the perfect example.
Facebook forged a long-standing high on its IPO, and when it finally returned to break above it, that event marked the beginning of an epic move towards higher prices that is still in development.
Bitcoin Cash has just accomplished the same feat, so as a standalone indicator, I can assume that as long as the Bitcoin Cash price remains above its previous all-time high, I will be looking for higher BCH prices to prevail. Falling below it, on the other hand, will negate these bullish implications.
The price action that caused Bitcoin Cash to break above its all-time high was not random at all because the price action that preceded it was already suggesting that a move towards higher prices was in development.
The price action that preceded the move towards a new all-time high is highlighted on the following Bitcoin Cash price chart.
Chart courtesy of TradingView.com
This BCH price chart highlights the constructive price action that was responsible for the price advance.
Constructive price action consists of an alternating wave structure containing a series of impulse waves and consolidation waves.
The impulse waves are highlighted in green, and they capture the stage in a bullish trend where an asset makes a move towards higher prices.
The consolidation waves are highlighted in purple, and they create the necessary conditions so a new impulse wave can develop.
These waves work together in an alternating wave structure in order to create and sustain a trend.
On October 27, Bitcoin Cash exited the consolidation wave in an upward direction. The feat is highlighted on the BCH price chart as a breakout, and it served to suggest that a new advancing impulse wave was in development.
This impulse wave was responsible for testing and breaking above the previous all-time high, which created the blow-off move that was experienced this past weekend.
The surge in Bitcoin Cash that took the world by storm was no surprise for the technical analysts among us. This move began in late October, and now that resistance at the previous all-time high has been overtaken, higher Bitcoin Cash prices are expected to follow. This bullish view is predicated on a single caveat, that the BCH price continues to trade above this level on a sustained basis.