A Look At Coinbase Stock Into Q3 Earnings: Will Crypto Revenues Indicate Bullish Sentiment Is Returning?

Coinbase Global, Inc COIN is set to print its fiscal third-quarter financial results after the market closes on Thursday, and the stock was sliding lower heading into the report. 

When the cryptocurrency trading platform printed a massive second-quarter loss on Aug. 9, the stock rallied over 7% the following day but subsequently continued in its downtrend, which brought Coinbase to a Sept. 23 low of $59.43.

For the third quarter, analysts estimate Coinbase will print an earnings loss of $2.40 per share on revenues of $659.88 million.

An ongoing bearish crypto market during the third quarter likely affected Coinbase: bearish markets often lead to lower trading volume and fewer transactions.

Coinbase guided for lower monthly transacting users and trading volume in the third quarter based on trends and conditions the company saw in July.

For the third quarter, Crypto traders and investors will be watching to see how much of Coinbase's revenue was brought in through Bitcoin and Ethereum trading, which may suggest whether interest in the crypto sector is increasing or waning.

From a technical analysis perspective, Coinbase’s stock looks bearish over the long-term but set for a bounce in the short-term.

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 institutions writing the options increase premiums to account for implied volatility.

For options traders with weekly calls to profit from Coinbase’s potential run higher or drop to new lows, the stock will need to move more than 13.13%, which is the implied move institutions have priced into the calls and puts expiring this Friday.

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The Coinbase Chart: Coinbase began trading in a sideways pattern on Aug. 19, between about $60 and $83. On Thursday, Coinbase broke bearishly down from the formation but hasn’t yet confirmed that a new downtrend will occur by printing a lower high.

• The stock was working to print an inverted hammer candlestick, which may indicate a bounce is on the horizon. If Coinbase receives a bullish reaction to its earnings print and spikes higher, bullish traders will want to see the stock break up above $84, which will indicate Thursday’s price action was a bear trap.
• Bearish traders want to see Coinbase fall under the psychologically important $50 level, which could put the stock in danger of printing a new 52-week low. If that occurs, a bounce will likely come over the next few trading days because Coinbase’s relative strength index will drop into oversold territory.
• Coinbase has resistance above at $60.99 and $83.32 and support below at $50.34 and $44.15.

Photo courtesy of Coinbase.