Why Coinbase Stock Looks Primed For A Massive Reversal

Coinbase Global, Inc COIN was trading almost 5% higher on Thursday as it continued its northbound trajectory in a strong uptrend. An uptrend occurs when a stock consistently makes a series of higher highs and higher lows on the chart.

The higher highs indicate the bulls are in control, while the intermittent higher lows indicate consolidation periods.

Traders can use moving averages to help identify an uptrend, with rising lower timeframe moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term uptrend, and rising longer-term moving averages (such as the 200-day simple moving average) indicating a long-term uptrend.

A stock often signals when the higher high is in by printing a reversal candlestick such as a doji, bearish engulfing or hanging man candlestick. Likewise, the higher low could be signaled when a doji, morning star or hammer candlestick is printed. Moreover, the higher highs and higher lows often take place at resistance and support levels.

In an uptrend, the "trend is your friend" until it’s not, and in an uptrend there are ways for both bullish and bearish traders to participate in the stock:

• Bullish traders who are already holding a position in a stock can feel confident the uptrend will continue unless the stock makes a lower low. Traders looking to take a position in a stock trading in an uptrend can usually find the safest entry on the higher low.
• Bearish traders can enter the trade on the higher high and exit on the pullback. These traders can also enter when the uptrend breaks and the stock makes a lower low, indicating a reversal into a downtrend may be in the cards.

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The Coinbase Chart: Coinbase reversed course into an uptrend on March 15 after printing a bullish double bottom pattern on that day and the day prior at the $150.42 level. The stock has created a consistent series of higher highs and higher lows since then, with the most recent lower high formed on March 21 and the $171.70 level and the most recent higher high created on Thursday.

• Coinbase is also trading within a rising channel pattern on the daily chart. A rising channel is considered to be bullish until the stock breaks down from the bottom ascending trendline of the pattern on higher-than-average volume.
• On Thursday, the eight-day exponential moving average (EMA) crossed above the 21-day EMA, which is bullish. The stock also regained support at the 50-day simple moving average, which indicates longer-term sentiment has turned bullish.
• If Coinbase closes the trading session near its high-of-day, it will print a bullish hammer candlestick, which indicates higher prices are likely to come again on Friday.
• If the stock closes the trading session near or below its opening price, it will form a doji or shooting star candlestick, which could indicate the next higher low is likely to come on Friday.
• Coinbase has resistance above at $191.48 and $208 and support below at $177.45 and $162.20.

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Photo courtesy of Coinbase.