How To Trade Marathon Digital After Q2 Earnings Print As The Stock Continues To Outpace Bitcoin

Marathon Digital Holdings, Inc MARA surged up over 11% at one point on Monday before falling to trade about 2% higher as the stock headed toward its second-quarter earnings print, which is expected after the market close.

When the Bitcoin BTC/USD miner printed a big first-earnings miss on May 4, the stock plunged 50% over the six trading days that followed to reach a May 12 low of $8.80. The stock then bounced up briefly before continuing in its steep downtrend, which brought Marathon to a July 5 52-week low of $5.20.

For the first quarter, Marathon reported revenue of $51.72 million, which missed the $54.27 million consensus estimate. The company reported an earnings loss of 2 cents per share, missing a consensus estimate of 22 cents per share. Marathon mined 1,259 bitcoin during the quarter, an increase of 556% from the same period the year prior.

For the second quarter, analysts, on average, estimate Marathon will report an earnings loss of 22 cents per share on revenues of $37.57 million. Traders and investors will be watching closely to see if Marathon has continued to significantly increase its production of Bitcoin during the second quarter.

From a technical analysis perspective, Marathon’s stock looks bullish heading into the event, having settled into a consistent uptrend pattern on the daily chart. It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

Options traders — particularly those who are holding close dated calls or puts — take on extra risk because the algorithms writing the options increase premiums to account for implied volatility.

For options traders with weekly calls, to profit from Marathon’s potential run higher or drop to new lows, the stock will need to move more than 16.44%, which is the implied move institutions have priced into the calls and puts expiring this Friday. If Marathon reacts to a lesser degree, the premiums will drop on Tuesday and the options are likely to expire worthless.

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The Marathon Chart: Since reaching the 52-week low, Marathon has been trading higher in an uptrend, outpacing Bitcoin, which reversed course into an uptrend on July 3. Bitcoin has gained about 27% between that date and Monday in comparison to Marathon, which is trading up about 178% from the 52-week low.

• Marathon’s most recent higher low in its uptrend was printed on Friday at $13.13 and the most recent confirmed higher high was formed at the $15.03 level the day prior. On Monday, Marathon spiked up above the most recent higher high, and if the stock falls lower on Tuesday, Monday’s high-of-day may serve as the next higher high within the pattern.
• A pullback, at least to print another higher low, is likely to come over the next few days because Marathon’s relative strength index (RSI) is measuring in at about 67%. When a stock’s RSI nears or reaches the 70% level it becomes overbought, which can be a sell signal for technical traders.
• Marathon may also be trading above an ascending trendline on the daily chart, which may act as support if the stock falls lower. If Marathon suffers a bearish reaction to its earnings print and breaks down from the trendline on higher-than-average volume, the uptrend will likely be negated and a downtrend may be in the cards.
• Marathon has resistance above at $14.66 and $19.31 and support below at $9.93 and $7.79.

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