Bitcoin cash has taken a beating today, but there are already signs of a potential bottom.
As of writing, the world's third-largest cryptocurrency by market capitalization is changing hands at $1,007. As per CoinMarketCap, the bitcoin cash-U.S. dollar (BCH/USD) exchange rate has depreciated by 20 percent in the last 24 hours.
The widely cited movement of money out of bitcoin (BTC) and into bitcoin cash following the suspension of the controversial Segwit2x software upgrade appeared to push BCH to record highs near $2,500 on Sunday. However, the bull run looked overdone as per technical studies, and BCH soon lost altitude while BTC made a sharp recovery from $5,500.
Despite the losses today, so far the BCH has defended the new base level of $1,000 as expected.
The price action analysis and the volume analysis shows a potential for a move higher to $1,300-$1,400 range.
Bitcoin cash chart
The above chart shows:
- The upward sloping 10-day moving average (MA) has helped prices defend the psychological level of $1,000.
- Despite confirmation of a bearish doji reversal (Monday's doji and a bearish follow-through on Tuesday), BCH is holding above the $1,000 mark.
The 4-hour and 1-hour charts also show potential for a recovery.
The above chart shows:
- Bullish doji reversal is confirmed
- The relative strength index (RSI) is oversold
So, the stage looks set for a recovery, however, the falling channel is still intact. A break above the falling channel resistance around $1,115 would validate the bullish doji reversal and oversold RSI, and would open up upside towards $1,400.
Volume analysis: Pullback from record highs lacks substance
As per CoinMarketCap, total trading volumes for BCH have dropped 84.2 percent over the last four days, indicating that the pullback from the record highs is largely "corrective" in nature.
- BCH is likely to defend its new base level of $1,000 and move higher to $1,400 over the next 24-48 hours.
- Only multiple 1-hour closes below $1,000 would weaken the bull market case and could yield a deeper pullback to $700 (Nov. 3 high).
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