Coinbase Stages Rebound But Will This Bearish Pattern Dominate?

Coinbase Global Inc COIN was popping up more than 3% on Wednesday, in tandem with the S&P 500, which was surging almost 2%.

The crypto trading platform had been decimated this year, plunging more than 86% since its Jan. 3 opening price of $256.27 to trade now at about the $36 level.

The stock has declined over 20% since it opened on Dec. 13.

The most recent decline, paired with Tuesday’s and Wednesday’s rebound, may have settled the stock into a bear flag pattern on the daily chart.

The bear flag pattern is created with a steep drop lower forming the pole, which is then followed by a consolidation pattern that brings the stock higher between a channel with parallel lines or into a tightening triangle pattern.

• For bullish traders, the "trend is your friend" (until it's not) and the stock may continue to rise upwards within the following channel for a short period of time. Aggressive traders may decide to purchase the stock at the lower trendline and exit the trade at the higher trendline.

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• Bearish traders will want to watch for a break down from the lower descending trendline of the flag formation, on high volume, for an entry. When a stock breaks down from a bear flag pattern, the measured move lower is equal to the length of the pole and should be added to the highest price within the flag.

A bear flag is negated when a stock closes a trading day above the upper trendline of the flag pattern or if the flag rises more than 50% up the length of the pole.

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The Coinbase Chart: If Coinbase breaks down from the bear flag, the measured move of 20% indicates the stock could fall toward $28. Bearish traders will want to see Coinbase break down from the ascending flag formation on higher-than-average volume to indicate the pattern was recognized.

• Bullish traders want to see big bullish volume come in and break Coinbase up above the eight-day exponential moving average (EMA), which would negate the bear flag. If Coinbase can regain that level as support, the next potential resistance could come at the 21-day EMA.
• Coinbase is trading in a downtrend, with the most recent lower high formed on Dec. 13 at $46.33 and the most recent lower low printed at the $34.35 mark on Tuesday. To negate the downtrend, Coinbase will either need to soar up to print a higher high or hold above the low on the next retracement.
• Coinbase has resistance above at $40.15 and $50.34 and support below at $34.51 and at the psychologically important $30 mark.