Coinbase Global Inc. COIN gapped up 7% to start Friday’s trading session following a massive crypto rally, which began at 11:00 p.m. Thursday evening.
Bitcoin BTC/USD surged almost 9% higher, leading both Ethereum ETH/USD and Dogecoin DOGE/USD about 5% higher. The general markets were also experiencing bullish price action, with the S&P 500 ripping up about 1.1%.
From a technical perspective, Coinbase looked set to launch higher because on Sept. 1, Tuesday and Wednesday, Coinbase formed a triple bottom pattern near the $61 mark.
A double bottom, or triple bottom, pattern is a reversal indicator that shows a stock has dropped to a key support level, rebounded, back tested the level as support and is likely to rebound again. It is possible the stock may retest the level as support again creating a triple bottom or even quadruple bottom pattern.
The formation is always identified after a security has dropped in price and is at the bottom of a downtrend whereas a bearish double top pattern is always found in an uptrend. A spike in volume confirms the double bottom pattern was recognized and subsequent increasing volume may indicate the stock will reverse into an uptrend.
- Aggressive bullish traders may choose to take a position when the stock’s volume spikes after the second retest of the support level. Conservative bullish traders may wait to take a position when the stock’s share price has surpassed the level of the initial rebound (the high before the second bounce from the support level).
- Bearish traders may choose to open a short position if the stock rejects at the level of the first rebound or if the stock falls beneath the key support level it created the double bottom pattern at.
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The Coinbase Chart: Coinbase reacted to the triple bottom pattern on Thursday, climbing over 10% higher to print a bullish Marubozu candlestick, which indicated the stock was likely to trade higher on Friday. After gapping up to start the day, Coinbase began to consolidate, sliding down to fill the lower gap, which may give bulls more confidence going forward.
- Due to the triple bottom pattern, Coinbase isn’t trading in either an uptrend or a downtrend. If an uptrend is about to occur, Coinbase will need to decline to print a higher low above the $61 level and bullish traders can watch for the stock to print a bullish reversal candlestick on the next downturn for a possible solid entry point.
- The gap up on Coinbase caused the eight-day and 21-day exponential moving averages (EMAs) to begin to curl upwards — which is bullish. If the stock is able to remain trading above the 21-day EMA for a period of time, the eight-day EMA will cross above the 21-day, which would give bullish traders more confidence going forward.
- Coinbase has resistance above at $83.32 and $112.14 and support below at $60.99 and $40.83.