Why Coinbase Stock Will Bounce Off Its All-Time Low

Coinbase Global, Inc COIN was plummeting over 24% in the premarket on Wednesday after printing abysmal first-quarter earnings.

For the quarter, the cryptocurrency trading app reported a loss of $1.98 per share on revenues of $1.17 billion, which badly missed the consensus estimate of EPS of 17 cents on revenues of $1.48 billion.

Coinbase also reported a 44% decline in crypto trading transactions for the quarter, which the company attributed to dwindling cryptocurrency prices. Bitcoin BTC/USD and Ethereum ETH/USD have lost 37% and 40%, respectively, since opening on Jan. 1 and the majority of retail traders in the crypto space, like in stocks, prefer bullish positions.

On Wednesday, analysts began to weigh in on Coinbase. Needham maintained a Buy rating on Coinbase but lowered its price target to $173 and JMP Securities maintained a Market Outperform rating on the stock and lowered its price target to $250.

Even the lowest new price target suggests an increase of about 212% from Coinbase’s opening price on Wednesday.

The negative reaction to Coinbase’s earnings print threw the stock into dangerous territory, because Coinbase has sunk to a new all-time low, where there is a lack of support.

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The Coinbase Chart: Although Coinbase lacks support below in the form of price history, when a stock moves in either direction too quickly, at least a short-term reversal is likely to come. In Coinbase’s case, the stock is likely to bounce because over the last two trading days trading volume has been unusually high, making a volume climax scenario likely.

The higher-than-average bearish volume indicates the bears are firmly in control, but eventually they will become exhausted and exit their positions, which will likely cause a bounce to occur. Coinbase has also entered into oversold territory, with a relative strength index of about 21%, which may act as a warning sign for the bears.
The gap-down open on Coinbase will eventually present a target area for bullish traders, because gaps on charts fill about 90% of the time. This suggests Coinbase is likely to trade up toward Tuesday’s low-of-day at the $70.19 mark at some point in the future.
Coinbase has resistance above at Tuesday’s low-of-day and at the $112.14 level.