To The Moon

Coinbase Is Down 60%+ Since July. What Its Chart Says Ahead of Earnings.

$Coinbase Global, Inc.(COIN)$   is heading into earnings this week at a time when the crypto firm's stock has fallen more than 60% from its July all-time high, has lost some 50% in three months and recently fell for 13 consecutive sessions. Let's see what technical and fundamental analysis tell us about this stock.

Coinbase's Fundamental Analysis

COIN is set to release Q4 results after the bell on Thursday, but its stock has been falling as Bitcoin has been falling. ( $Bitcoin (BTC.CC)$ is down some 45% from its October record highs.)

The Street is looking for the company to report $0.66 in Q4 earnings per share on about $1.85 billion of revenue.

That wouldn't compare favorably at all to the company's year-ago quarter, when COIN posted $4.68 in EPS on about $2.3 billion of revenue.

In fact, if Wall Street's estimates are correct, Coinbase will see an 85.9% year-over-year drop in adjusted EPS and about an 18% y/y decline in revenue.

Making matters worse, all 15 of the sell-side analysts that I know of who cover this stock have reduced their earnings estimates since the quarter began.

Coinbase's Technical Analysis

Is there anything positive in the chart? Let's take a look going back some eight months running through last Thursday (Feb. 5):

We will see that since the stock's high in July, COIN has put together back-to-back falling-wedge patterns of bullish reversal (marked with tan in the chart above).

The first of these two falling wedges did create a tradeable pop, but the second one failed miserably.

In fact, COIN appears based on technical indicators to be a broken stock right now. Just since late last year, the shares have lost their:

-- 21-day Exponential Moving Average (or "EMA," denoted by a green line above).

-- 50-day Simple Moving Average (or "SMA," marked with a blue line).

-- 200-day SMA (the red line).

The stock also suffered a so-called "death cross" in late December. That's a bearish signal that occurs when the red line drops below the blue line).

Meanwhile, Coinbase's Relative Strength Index (the gray line at the chart's top) is relatively weak and mired in technically oversold territory.

Similarly, the stock's daily Moving Average Convergence Divergence indicator (or "MACD," denoted by black and gold lines and blue bars at the chart's bottom) is also postured very bearishly.

The histogram of the 9-day EMA (the blue bars) is deeply negative, while the 12-day EMA (the black line) is running below the 26-day EMA (the gold line) and both are in negative territory. All of those things are bearish signals.

An Options Option

Options traders who are still optimistic about Coinbase's prospects going into earnings despite all the technical indicators to the contrary might employ a counter-trend trade.

Here's an example that involves going long one call and short another with a higher strike price, where both options expire on the same day:

-- Long one COIN call with a Feb. 13 expiration (i.e., after earnings) at a $155 strike price. This would cost about $12.10 at recent trading levels.

-- Short one COIN Feb. 13 $170 call for a roughly $4.65 credit.

Net Debit: $7.45.

Options traders using this set-up would be risking the $7.45 net debit, the trade's maximum theoretical loss. They'll see this if COIN trades at or below $155 at expiration.

Conversely, this trade would offer a $15 return if COIN trades at or above $170 at expiration, for a $7.65 maximum theoretical profit.

Disclaimer: The information provided is NOT financial advice. I am not a financial adviser, accountant or the like. This information is purely from my own due diligence and an expression of my thoughts, my opinions based on my personal experiences, and the way I transact.

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