PreMarket Prep Stock Of The Day: Coinbase

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

On the PreMarket Prep Show, a wide variety of trading strategies are discussed. Dennis Dick is always quick to emphasize his core strategy of “relationship-based” trading for his short-term account.

Simply stated, it's a form of trading in which he buys or sells stocks based on a particular catalyst(s). For example, if an issue in the banking sector has reported an earnings beat or received an analyst upgrade, he may attempt to purchase other bank stocks that may move in sympathy with the primary catalyst.

On the flip side, if there is bad news on a primary issue in a sector, he may attempt to short related issues that may decline in sympathy with the news. What better catalyst could an investor have for Coinbase COIN than the price action in Bitcoin BTC/USD?

Bitcoin Futures Make All-Time HIgh On Day Of IPO: Certainly, the Coinbase IPO was a positive catalyst for Bitcoin.

Bitcoin caught a strong bid five days ahead of the much anticipated IPO, which was on April 14. Over that course of time, Bitcoin futures, trading on the CME, rallied from the close on April 7 ($56,310) to $65,520 (all-time high) on the actual day of the IPO. Its all-time closing high was posted the following day at $63,840.

It should be noted the futures contract put in place a double top on April 15 ($64,030) and April 16 ($64,000), which set the stage for the recent decline.

Don't Want To Be Left Out: Several investors that have missed out on the Bitcoin boom were determined not to miss out on the Coinbase IPO and the price action reflected that sentiment. In a wild ride in its first session, the issue debuted at $381, bolted to $429.54 (which stands as the all-time high) and sharply reversed course. The ensuing decline of $120 took the issue to $310 and it rebounded to close at $328.28.

Obviously, the early buyers of the issue off the open turned into early sellers or else were faced with steep losses.

Bitcoin Goes Into Reverse And Coinbase Follows: Including the day of the IPO and Friday’s price action, Bitcoin has been lower in six of the last eight trading sessions. The two outliers were a solid gain were on April 15 ($62,400 to $63,840, the all-time closing high) and the other being a smaller gain on April 20 ($56,045 to $56,715).

Excluding its first day of trading, which could be considered a download day based on it closing way below its opening print, Coinbase has had only one green day leading into Friday’s session. That being April 16 ($322.75 to $342), which stands as the all-time closing high.

Bitcoin Finds Support And Coinbase Rebounds: At one point in Friday’s session, Bitcoin futures were down $5,465 when it bottomed at $47,395 just after 4 a.m. EST. That marks the lowest level for the contract since it bottomed on March 5 at $46,630. As of 1:15 p.m., Bitcoin is $2,000 off that low but still red for the 24-hour session.

Reflecting Bitcoin’s weakness off the open, Coinbase opened lower by over $10 but immediately bottomed at $282.07 and began to rebound with the cryptocurrency. The issue is higher by $1 at $294.635 at publication time.

The full discussion on Coinbase and Bitcoin and related issues from Friday’show can be found here.