The Bitcoin Cash (BCH) price has been gradually retracing since the Nov. 26 drop. A breakdown from the current short-term pattern is likely, causing a drop to the support levels outlined below.
The weekly chart for BCH shows that the 0.5 Fib retracement level rejected the price twice (shown with the red arrows below) at $316. While BCH has moved above this level, notably reaching a high of $363, it has failed to close above it, creating a long upper wick instead.
Despite the rejections, BCH has been following an ascending support line since the beginning of March.
As long as the price is trading above here, the bullish structure is intact and BCH is likely to continue rallying, eventually making another attempt to break out above $316.
The daily chart shows that the BCH price has already broken out from a descending resistance line and validated it as support afterward (green arrow). This suggests that a bullish continuation is in store.
However, the price has barely moved upwards since the re-test and technical indicators are not showing strength.
The main support area is at $240. A decline towards this area before an eventual upward move would also fit with the long-term ascending support line since it would validate it as support again before possibly moving higher.
Cryptocurrency trader @DTCryptotrades outlined a BCH chart that shows an ascending wedge, suggesting that the price will break down and head lower.
The move resembles a parallel channel more than it does a wedge, but since the channel is also corrective, it doesn’t change the bias. Furthermore, the resistance line of the channel coincides with the 0.382 Fib retracement level, increasing its significance.
While technical indicators are still neutral, several factors suggest a breakdown is likely:
- The presence of the channel.
- A weak retracement.
- Bearish-looking long-term readings.
If a breakdown occurs, a decline towards the previously mentioned $240 support area seems the most likely option.
The wave count since Nov. 24 also supports this possibility since it suggests the price is in wave four (black) of a bearish impulse, with an extended third wave.
The breakdown from the channel would confirm this possibility, causing a final decline towards $240.
To conclude, while BCH’s long-term trend remains unclear, a short-term breakdown from the current pattern is likely, which would take the price towards $240.
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