Stock Of The Day: Classic Flag Pattern In Coinbase?

Coinbase Global, Inc. COIN continues to consolidate on Thursday. This comes after the stock gained about 35% in just two weeks.

A flag pattern formed on the chart and could be a bullish dynamic. It is why Coinbase is the Stock of the Day.

Some people think technical analysis is like astrology or reading tea leaves. And for many analysts, it is. They look for patterns on charts without understanding the price action and trading dynamics that make them form.

If understood and applied correctly, technical analysis is the study of the supply and demand and psychology in a market.

For example, when the leadership of the market is changing, from bulls to bears or bears to bulls, a reversal pattern may appear on a chart. This can be a rounded pattern, a reversal day, a V pattern, or a double or triple top or bottom.

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If the leadership changes slowly over an extended period of time the rounded pattern may form. If the change takes place in one day, a reversal day pattern may form. If a stock tests and fails at resistance or support before reversing, it could be a double or triple top or bottom.

A flag pattern is different. It is a continuation pattern. It indicates a break in a trend that will soon get back into gear.

As you can see on the chart, Coinbase made a large and rapid move higher. This resulted in large amounts of volume trading.

Some of the traders who were doing the buying decided that the stock had gotten ahead of itself. They left the market in hopes that the price would go back down so they could finish their buying at lower prices.

As a result of this, the stock traded sideways and the volume diminished. The key to the flag pattern is the lower volume. It is a characteristic of a break in a trend.

There is a good chance Coinbase breaks out of the upside of this pattern and starts to move higher again.

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