Bitcoin Cash: Why a tiny upward movement could provide a BCH shorting opportunity

Bitcoin has been able to defend the $15.8k-$16.2k region for the last two days. A substantial area of resistance lay to the north at $18.2k. Should BTC reach that level, the entire zone from $17.8k to $18.5k could see increased selling pressure. Bitcoin Cash also had some bullish momentum on the lower timeframes.

However, its prognosis on the daily chart has remained gloomy. This pessimistic trend is likely to persist unless BCH proponents can bring prices back over $120. Should traders attempt to sell a price bounce, or should they wait for a surge above $120 to acquire the coin?

A fair value gap could offer a shorting opportunity

Here is why a small move upward for Bitcoin Cash can offer a shorting opportunity

Source: BCH/USDT on TradingView

Based on the swing high and low at $126 and $87 respectively, a set of Fibonacci retracement levels were plotted. It showed the 61.8% and 78.6% retracement levels to lie at $111.1 and $117.7 respectively.

Bitcoin Cash was quick to bounce from the $87 low and quickly surfaced above the $100 mark on 10 November. Since then, its recovery has slowed down. On the daily timeframe, the market structure remained bearish.

On 8 November, the quick pace of the selling meant that inefficiency was seen on the daily chart. This was highlighted by the gray box and has confluence with the Fibonacci golden pocket. Besides that, the $119.4 was a significant level in recent days. A 1-day trading session close above this level would mean that the market structure had flipped to bullish.

The technical indicators also showed some seller strength. The Relative Strength Index (RSI) was below neutral 50, although it signaled more of a neutral momentum with a value of 45. The Chaikin Money Flow (CMF) also climbed to -0.04, which meant that the capital flow out of the market lessened over the past few days.

Hence, traders would likely have a bounce in prices toward the $112-$115 region. A bearish stance in this region would have a clear invalidation above $119.4, while take-profit levels can be set at $100 and $89.

90-day MVRV rakes a hit during the recent plunge

In the past few months, almost every time the 90-day Market Value to Realized Value (MVRV) ratio went into positive territory, the price met with significant selling pressure. Most recently this happened on 4 November. Shortly thereafter on 5 November, BCH formed a local top at $126 before a swift decline.

At press time, the MVRV remained in the negative territory. However, a foray toward the 4% or 5% values can be something to watch out for. Meanwhile, Bitcoin Cash’s social dominance for the month of November witnessed a slight increase.

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