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A surging Bitcoin price saw Coinbase Global (COIN) rally hard into the end of last year.
In just two months, the crypto exchange’s stock price gained around 167%.
But after topping out in late December, COIN reversed sharply at the start of this year. And right now, it is fighting to hold the $150 level.
On the one hand, COIN bulls believe that the SEC’s recent approval of Bitcoin spot ETFs should be a boon. After all, COIN is the chosen custodian for 8 out of the 11 SEC-approved Bitcoin ETFs.
But longer term, the bears view these new ETFs as a direct competitor to COIN’s business.
So let’s see what the chart is telling us from here…
Surging Momentum
The 50-day Moving Average (MA, blue line) in the chart below shows COIN gently tracking higher throughout 2023.
But this longer-term average belies just how quickly COIN can move…
Coinbase Global (COIN)
Source: e-Signal
From January to June last year, the 10-day MA (red line) and 50-day MA moved close together.
But then momentum surged. The Relative Strength Index (RSI) broke strongly into its upper range (above the green line). And COIN’s price jumped.
It took less than a month for COIN to double in price.
The rate at which the 10-day MA accelerated above the 50-day MA reveals the strength of that move.
After retracing, COIN tracked sideways again. You can see the 10-day and 50-day MAs tracking closely again from mid-August to early November.
But then an even more explosive move broke out…
This coincided with two technical signals:
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The RSI had zig-zagged along support/resistance (the green line) from late August to November. Then it finally burst higher and gained traction in its upper range. So strong was the rally that the RSI remained overbought for more than half of COIN’s rally.
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The 10-day MA finally crossed and accelerated above the 50-day MA again. That surge also dragged the longer-term 50-day MA sharply higher.
But recently, the RSI began making lower highs (lower orange line). Yet COIN was still climbing (upper orange line). The chart pattern warned of a potential reversal.
Take another look:
Coinbase Global (COIN)
Source: e-Signal
Declining momentum eventually drags a stock price lower.
And that is what we saw…
As the RSI fell back toward support, COIN lost 23% (from top to bottom) in just three trading days.
Now COIN is struggling to hold the $150 level. So what can we expect from here?
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Testing Support
COIN’s recent weakness might be a case of “selling the (SEC approval) news.”
Yet there are several other things I’ll be watching from here.
For a start, the RSI’s action around support/resistance will be key (red circle).
If the RSI slips further into its lower band, COIN will also likely fall more. If so, COIN could soon test the $125 level.
I’ll also keep a close eye on our two MAs.
After peaking in July 2023, the 10-day MA reversed and steadily tracked lower toward the 50-day MA.
If that pattern repeats, that will add further momentum to COIN’s down move.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict
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