One stock that has benefited enormously from Bitcoin’s recent surge is Coinbase Global (COIN)…
The crypto exchange gapped higher on Donald Trump’s victory. (Trump has spoken well of Bitcoin and digital finance more broadly.)
Then COIN gapped higher again.
Within a week, COIN rallied around 90%.
But after hitting a three-year high, COIN’s upward trajectory has slowed. It has made higher highs… but it has been a slow grind.
Meanwhile, buying momentum has retraced from recent highs.
So with COIN’s rally hanging in the balance, let’s check what’s coming next…
Rocketing Higher
After surging early this year, COIN settled into a sideways pattern.
The 50-day Moving Average (MA, blue line) flattened out, with the 10-day MA (red line) crossing it multiple times in both directions.
After drifting lower, COIN found a base in early September while buying momentum returned…
Coinbase Global (COIN)
Source: e-Signal
COIN made a higher low in October… then another one in early November. COIN rocketed higher off the back of Trump’s victory.
You can gauge the strength of that rally by the rate at which the 10-day MA accelerated above the 50-day MA.
But after that massive 90% surge, COIN’s rally has markedly slowed.
It has continued to make higher highs (upper orange line). Yet the short-term trend (as shown by the 10-day MA) has flattened out.
Meantime, the Relative Strength Index (RSI) reversed from overbought territory and has made a series of lower highs (lower orange line).
So buyers are increasingly lacking conviction.
When you see a diverging pattern like this (orange lines), it can often precede a pullback.
Adding to the uncertainty, Bitcoin is struggling for direction after breaking through (and then falling below) the $100,000 level.
So what can COIN investors expect from here?
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Watch Momentum
The Bitcoin price action will remain a major influence on COIN.
But the chart still provides plenty of clues as to what happens next…
As you can see, the RSI has been tracking lower and could soon test the support level (green line).
Take another look:
Coinbase Global (COIN)
Source: e-Signal
What happens here will be key.
For COIN to resume its uptrend, the RSI has to rebound from this support level.
We’d then look for the 10-day MA to accelerate above the 50-day MA to confirm the up move.
Alternatively, the RSI breaking below support would mean a pullback in COIN is likely.
After such a strong move higher, that down move could be sharp and quick as panicked traders look to offload their long positions.
Either way, with cryptos back in the spotlight after Trump’s win, plenty of tradeable swings lie ahead.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict