Coinbase Global, Inc (NASDAQ:COIN) has created a double bottom and triple bottom patterns on the daily chart.
A double 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 where the double bottom pattern was created.
See Also: Famed Short Seller Jim Chanos Targets Coinbase
The Coinbase Chart: Coinbase formed a double bottom pattern on March 14 and March 15 at the $150.42 level, and on March 16 the stock reacted to the formation and shot up over 24% over the 3 trading days that followed to reach a high of $186.69 on Friday.
- On Monday, the stock opened slightly lower and continued to slide during the first part of the trading day to test support at the eight-day exponential moving average.
- Coinbase has not yet confirmed a new uptrend is on the way because the stock has not printed a higher low. If Coinbase closes the trading day near its low-of-day it could indicate lower prices will come on Tuesday, while if the stock closes the trading day near its mid-range or near the high-of-day, it could indicate the higher low is in, which would confirm the uptrend.
- The uptrend will be negated if Coinbase falls below the double bottom level.
- The move lower was taking place on lower-than-average volume, which indicates healthy consolidation.
- Coinbase has a gap above on the chart between $217.49 and $220.84. Gaps on charts fill about 90% of the time, so it’s likely the stock will trade up into that range in the future.
- The stock has resistance above at $177.45 and $191.48 and support below at $162.20 and just above the $150 level.
