Coinbase Global, Inc COIN opened slightly higher on Tuesday in tandem with Bitcoin BTC/USD and Ethereum ETH/USD, which were rising.
The general market was also rebounding, with the S&P 500 popping up about 0.5%, which helped to buoy Coinbase higher.
Although Coinbase was spiking up over 3%, the stock remains in a short-term consolidation pattern. In Coinbase’s case, the consolidation is taking place within a double inside bar formation.
An inside bar pattern indicates a period of consolidation and is usually followed by a continuation move in the direction of the current trend.
An inside bar pattern has more validity on larger time frames (four-hour charts or larger). The pattern has a minimum of two candlesticks and consists of a mother bar (the first candlestick in the pattern) followed by one or more subsequent candles. The subsequent candle(s) must be completely inside the range of the mother bar, and each is called an "inside bar."
A double, or triple inside bar can be more powerful than a single inside bar. After the break of an inside bar pattern, traders want to watch for high volume for confirmation the pattern was recognized.
- Bullish traders will want to search for inside bar patterns on stocks that are in an uptrend. Some traders may take a position during the inside bar prior to the break, while other aggressive traders will take a position after the break of the pattern.
- For bearish traders, finding an inside bar pattern on a stock that's in a downtrend will be key. Like bullish traders, bears have two options of where to take a position to play the break of the pattern. For bearish traders, the pattern is invalidated if the stock rises above the highest range of the mother candle.
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The Coinbase Chart: On Monday, Coinbase printed an inside bar pattern, trading within Friday’s range. On Tuesday, the stock continued to trade within Friday’s range, which has settled Coinbase into a double inside bar pattern, which leans bullish because the stock was trading higher before entering into the consolidation pattern.
- The consolidation has been taking place on decreasing volume, which adds validity to the inside bar pattern. Traders and investors can watch for the stock to eventually break up or down from Friday’s candlestick on higher-than-average volume to gauge its future direction and determine that the pattern was recognized.
- Coinbase is also trading in a confirmed uptrend, making a series of higher highs and higher lows from the $31.55 mark, where the stock began to rebound on Jan. 6. Coinbase’s most recent higher low was formed on Jan. 25 at $49.60 and the most recent higher high was printed at the 62.29 mark on Friday.
- If Coinbase breaks up from Friday’s mother bar, bullish traders will want to see the stock regain the 200-day simple moving average (SMA) as support, which is trending just above Coinbase’s share price. Bearish traders want Coinbase to break down from the inside bar pattern or reject from the 200-day SMA if the stock breaks higher.
- Coinbase has resistance above at $60.99 and $83.32 and support below at $50.34 and $40.15.
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