Bitcoin Cash: How to identify the potential entry point for investors

Disclaimer: The findings of the following analysis are the sole opinions of the writer and should not be considered investment advice

Since 9 November, Bitcoin Cash (BCH) has sharply declined in a down-channel (white). For the most part, the 20 EMA (red) stood as a sturdy resistance. Although it broke out of the pattern, BCH struggled to find a sustainable close above its 20 EMA.

Going forward, a break above its long-term Point of Control (POC, red) would position BCH to test the $319-$326 range before conforming to its long-term downtrend. At press time, BCH was trading at $284.4.

Bitcoin Cash Daily Chart

The alt lost over 64% of its value over the last 11 weeks and hit its 13-month low on 24 January. The bulls finally stalled the downturn by stepping in at the $275-mark 15-month support. Consequently, the bulls gained enough thrust to break out of the pattern but struggled to overpower the 50 EMA (cyan). 

The long-term bearish tendencies visibly prevailed as the price hovered near the lower band of the Bollinger Bands (BB) during this phase. After a recent bearish divergence with its RSI, BCH retested the $275-support that coincided with the lower band of the BB.  

Now, assuming the historical tendencies of keeping the immediate support are intact, BCH will eye a test of its POC. After continuing to be in a tight phase near the $290-mark, the bulls would try to reclaim the 20 EMA as support.

Rationale

The RSI has marked higher troughs over the last two weeks, diverging with the price action. Thus, a higher close on the 8 March candlestick would affirm the bullish divergence and its recovery chances in the days to come.

Interestingly, the -DI seemed to reverse from its resistance and kept the recovery chances alive. Also, the OBV was in the footsteps of RSI as it reaffirmed a bullish divergence.

Conclusion

Considering the divergences with its technical indicators, BCH has decent recovery chances in the coming days. A close above the POC could trigger a potential entry point. But, any fall below its immediate support would add fuel to its existing bearish vigor.

Having said that, BCH shares a 91% 30-day correlation with the king coin. Thus, keeping a watch on Bitcoin’s movement would be vital in making an accurate decision.