Coinbase Global, Inc (NASDAQ:COIN) is set to print its fourth-quarter financial results after the market close on Thursday. The stock was trading relatively flat heading into the event after gapping down over 7% to start the trading day and printing a new all-time low at $155.92.
When the cryptocurrency trading platform reported its third-quarter earnings on Nov. 9, it marked the temporary top for the stock and Coinbase gapped down over 9% the following day and then entered into a long-term downtrend, declining a total of 53% since that date.
For the third quarter, Coinbase reported earnings per share of $1.62, which beat the $1.56 estimate, and net sales of $1.24 billion, which missed the estimate of $1.57 billion.
Options expert Tony Zhang said on CNBC's "Options Action" that one trader took a massive bullish position through selling $175-puts with an expiry of Feb. 25. If the stock falls below that price following its earnings print, the trader will have to purchase $10 million worth of stock.
Zhang also noted the implied volatility indicates a 12.7% move in Coinbase’s stock price.
The bet is based simply on a guess Coinbase will react bullishly to its earnings print because the stock’s chart indicates there is likely limited upside.
It should be noted that holding stocks or options over an earnings print is akin to gambling, as 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.
See Also: Analyst Ratings For Coinbase Global
The Coinbase Chart: When Coinbase gapped down on Thursday, it fell back into a falling channel pattern that has been holding the stock mostly down since Nov. 9. When bulls came in and bought the dip, Coinbase broke back up through the upper descending trendline of the pattern.
Coinbase has a lot of work to do to buck its downtrend despite the somewhat bullish action on Thursday. The stock entered into its most recent downtrend on Feb. 10 at the $217.49 mark, which was confirmed on Feb. 16 when Coinbase printed a lower high below that level at $214.02. Coinbase will need to rise up toward the $215 level in order to negate the trend.
The stock is likely to bounce up to at least print another lower high because its relative strength index (RSI) is measuring in at about 36%. When a stock’s RSI nears or reaches the 30% level it becomes oversold, which can be a buy signal for technical traders.
Coinbase is trading below the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending below the 21-day, both of which are bearish indicators. The stock is also trading below the 50-day simple moving average, which indicates longer-term sentiment is bearish.
Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.
- Bulls want to see big bullish volume come in and push Coinbase up above the Feb. 16 high-of-day to negate the downtrend, which will cause the stock to regain support at the eight-day and 21-day EMAs. Coinbase has resistance above at $177.45 and $191.48.
- Bears want to see big bearish volume come in and drop Coinbase back down into the falling channel and for the upper trendline of the pattern to continue to push the stock down until it loses support at $162.20. Below the level, there is further support at $155.92.
