Finance,  Technology

When to buy Bitcoin Cash (BCH) for a profit? A technical analysis (May 2021)

Note: The information in this article is NOT financial advice.

 

Outline

 

In what follows, you will find conditions under which Bitcoin Cash’s price to the US Dollar is likely to rise or drop. The prices of the cryptocurrency are plotted over time. Each price point is the average of prices over a day, and the window represents a year. Indicators, such as Bollinger Bands, Volume, MACD, and RSI, will be used to infer the likelihood of the price to rise or drop. (Charts from TradingView are used.)

Bollinger Bands

bollinger bands - bitcoin cash
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When the Bollinger Bands are placed against the prices of the cryptocurrency, a pattern can be observed. This pattern can be used to infer when the price of the cryptocurrency is likely to rise and drop. When the price touches or crosses the lower band, it eventually hits or crosses the upper band after some time (see image), and vice versa. Sometimes, the price only needs to gets close enough to either the lower or upper band to observe this pattern (see image). When the midline or mid-band of the Bollinger Bands has a positive (upward) trend, the price tends to stay above the midline, and when the midline or mid-band has a negative (downward) trend, the price tends to stay below the midline (see image).

Volume

volume - bitcoin cash
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When the price crosses, touches, or nears either the lower or the upper band, there is an uptick in the volume chart (see image). The uptick may occur slightly after the price crosses, touches, or nears the lower or upper band; it may also occur when the price suddenly drops or rises. By an uptick, we mean a rise in the volume, where the volume for the day before and the volume for the day after the uptick are lower than the volume that causes the uptick.

Moving Average Convergence Divergence (MACD)

macd - bitcoin cash
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When the price has a positive (upward) trend, the blue line of the MACD is above the red line, the farther apart these lines are (or the more they diverge), the more positive the price trend is. When the price trend turns negative (downward), the blue and red lines meet (or converge) and cross each other, and the red line is above the blue line; the farther apart they are, the more negative the price trend is.

Relative Strength Index (RSI)

rsi - bitcoin cash
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Roughly, when the price rises, so does the RSI, and it goes down when the price drops (see image). When the value of the RSI nears 30, the price tends to cross, touch, or near the lower band, and when the value of the RSI nears 70, the price tends to cross, touch, or near the upper band. When the price crosses the upper Bollinger band and stays above it for some time and the upper and lower Bollinger bands are wider apart, the RSI stays above the 70 line for some time (see image). The trend of the RSI graph tends to coincide with the trend of the midline of the Bollinger Bands.

When to but Bitcoin Cash (BCH) for a profit?

buy order - bitcoin cash
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On May 16th, 2021, Bitcoin Cash’s price to the US Dollar dropped below the mid-band after having been close to the upper Bollinger Band on May 11th (see image). On May 16th, the MACD lines were diverging with the red line above the blue line, suggesting that the price of the cryptocurrency may continue dropping. The RSI value is about 50, suggesting the momentum is neither high nor low, and the volume is low relative to volumes of previous days. Although all these factors suggest that the price of Bitcoin Cash may continue dropping after May 16th, the trend of the mid-band is still positive, suggesting that the price of the cryptocurrency may not go down as far as crossing the lower band but may jump back up after a couple of days. If the price indeed starts to rise, the MACD lines will converge and cross each other, and the blue line will be above the red line; also, the RSI will rise.

Last Words

On May 16th, 2021, the price of the Bitcoin Cash dropped below the mid-band after having close to the upper band. The Volume, the MACD lines, and the RSI value on that day suggest that the price may continue dropping but may jump back up soon because of the positive trend of the mid-band.


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