Coinbase (COIN) stock price has nearly doubled from its June lows with much higher upside potential this year, according to various technical and fundamental indicators.
The inversion of the symmetrical triangle of COIN
COIN has seen a strong rally to the upside after falling almost 90% from its all-time high of $368.90 in November 2021.
Coinbase stock price was up more than 95% to $75.27 by the close of trading on July 20, from its May 12 local low of $40.83. Its recovery led to the formation of a symmetrical triangle pattern with price forming a sequence of lower highs and higher lows.
Symmetrical triangles in a downtrend are usually negative continuation patterns. They resolve after the price breaks below its lower trend lines to continue falling. But on rare occasions, a symmetrical triangle could form at the end of a downtrend, leading to strong bullish rallies.
It appears that COIN has already entered the breakout phase of its symmetrical triangle reversal pattern. Notably, shares of Coinbase closed above the upper trend line of the structure on July 28 while accompanying an increase in trading volume, as shown below.
COIN is at $80 as an intermediate resistance level, while a further rally towards $135 is targeted. The profit target is measured after calculating the maximum distance between the upper and lower trend lines of the symmetrical triangle and adding the result to the breaking point.
The upside target of the triangle appears to be closer to COIN’s 200-day exponential moving average (200-day EMA; the blue wave on the chart above) near $153. This psychologically raises the possibility of COIN wicking to the upside. towards $153 if it reaches a price of $135 this year.
That would mean a 102% gain from current prices.
Coinbase Valuation: First Quarter Earnings
Coinbase’s first quarter earnings were disappointing due to weaker-than-expected revenue and a substantial decline in users transacting monthly.
The company has not revealed any cost management plan in the aforementioned earnings call, but a note published by the Financial Times this June shows that it would cut almost a fifth of its workforce. Additionally, Coinbase ended its popular affiliate program in July, according to Business Insider.
“Our target price for COIN is around $52 in 2022,” Rumak Research, a group of financial analysts, noted in its recent evaluation of Coinbase. The analysis given was based on reactions to past market cycles, along with its Capital Asset Pricing Model (CAPM), as shown below.
The stock’s target price is closer to $160, according to Rumak Research, taking into account the current average US market risk premium of 5.6%.
In a similar vein, DA Davidson analyst Christopher Brendler noted that Coinbase would survive the crypto bear market despite its “financial health,” which includes $3.4 billion of long-term debt. Nonetheless, the company is still sitting on $6.1 billion.
“The fact that they have to scale back a little bit, may not be the best news, but ultimately I know they’re not going to be in a situation where they’re struggling to survive,” Brendler told Forbes, adding:
“They’ve been through this before and I’m confident they’ll be able to get through it again.”
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.