Are you feeling a bit of FOMO seeing how the SEC’s approval boosted crypto and other crypto-related assets? Well, don’t. There might be an opportunity for a bullish trade with the largest cryptocurrency exchange in the US: Coinbase (COIN).
Coinbase’s stock is correlated to Bitcoin and it’s likely to benefit from this new regulatory development. Coinbase is in a downswing, but it’s worth adding the chart to your ChartList and watch for it to land and reverse.
Finding COIN Through a StockCharts Ichimoku Scan
The good news is that Coinbase was one of the stocks filtered in the StockCharts scan Entered Ichimoku Cloud on Wednesday.
Why this particular scan? Because entering the cloud already pimples a pullback, and it allows you to see the projected bullishness of the price through the color and thickness of the cloud under the prevailing price and projected 26 periods ahead.
COIN presented an intriguing possibility in light of the SEC’s recent actions. Let’s analyze the stock’s technical environment.
COIN: The Technical Scenario
If you’re bullish on crypto and looking to invest in the exchange, start with a birds-eye view of COIN’s price action before drilling down to specific entry points.
The chart below shows COIN’s price trajectory since its IPO launch in April 2021. Note its relatively close correlation to Bitcoin ($BTC), represented by the black line on the chart.
CHART 1. WEEKLY CHART OF COIN. Notice how closely COIN’s price follows Bitcoin’s ($BTCUSD) movements.Chart source: StockCharts.com. For educational purposes.
The above chart captures COIN’s price action from its IPO launch. Note the blue horizontal line connecting the highs of August 2022 and July 2023. These highs and the series of swing lows throughout 2022 and 2023 marked a wide and long-term trading range that COIN couldn’t break above until November 2023.
But while this trading range appeared relatively static, lacking strong upward momentum, the Chaikin Money Flow (CMF), in contrast, rose dramatically (see red arrow tracing the upward path of the CMF levels). As you know, CMF measures buying/selling pressure of a stock. And in this case, the shift from heavy selling to increased buying indicated a bullish shift that wasn’t as pronounced in the price chart alone.
Those who were looking at the longer-term weekly chart might have anticipated the possibility (then) that COIN potentially bottomed at the beginning of 2023, as the CMF finally crossed the zero line into positive territory.
Currently, COIN is in a downswing, but support may be found at the previous resistance level that marked its November breakout. But to get a clearer picture, let’s look at the daily chart to drill down further and find an entry point.
The daily chart below includes the Stochastic Oscillator in the lower panel. The oscillator indicates that the price is at the oversold level. As the scan indicates, COIN has entered the Ichimoku Cloud, which often serves as a support (or in bearish cases, resistance).
CHART 2. DAILY CHART OF COIN. The Fib Retracement, Cloud, and Stochastic Oscillator give a green light for a “long” entry.Chart source: StockCharts.com. For educational purposes.
What’s important is the larger context surrounding the price’s entry into the kumo (Ichimoku cloud). On a weekly scale, there is an increase in buying pressure, as measured by the CMF supporting COIN’s longer-term uptrend. The cloud color is green, and its range has more or less thickened as projected 26 periods from the current day.
To fine-tune the pullback’s measure, note the Fibonacci retracement levels from October 2023 to the December high.
Bullish traders might find the favorable range of entry now, but, as far as pinpointing an ideal entry point, you’d want to see a strong reversal candle in the next few sessions before committing to a long position. Assuming that your entry point is at or above $115.05, which is where the 61.8% Fib retracement level is located, you’d want to place a stop loss below $115, which is also the lower end of the (rising) cloud.
The Bottom Line
The landscape for Coinbase (COIN) looks promising from the fundamental and regulatory end, considering the SEC’s approval for multiple Bitcoin ETFs. Technically, every indicator applied to the chart gives a clear bullish green light on an entry. Of course, it’s important to enter any position cautiously, as several factors can change the market dynamics and investor sentiment.
Final thoughts: Scans are important. In addition to the Ichimoku scan, hundreds of other scans are available in StockCharts. Try them out and see which ones align with your investment goals. Predefined scans are a good starting point, but you can also create your scans.
How To Run an Ichimoku Scan (or any technical scan)
- Log in to your StockCharts account
- Go to Your Dashboard and, in the Member Tools window, scroll down to Reports & More and click on Sample Scan Library.
- The Ichimoku Patterns are in the Candlestick Patterns section. Click the Run button next to the scan (in this case, Entered Ichimoku Cloud) and you’ll see a list of the filtered stocks and ETFs.
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.