Coinbase Stock Faces $150 Test as Earnings Raise Breakout Hopes

Coinbase stock remained under pressure ahead of the company’s third-quarter earnings announcement on Oct. 29. Wall Street expects weaker revenue, while elevated short interest reflects continued uncertainty.

However, the technical outlook presents competing scenarios around $150 support and $200 resistance. Investors will assess whether earnings can reverse the recent decline.

Coinbase Earnings to Show Revenue Decline

Bitcoin and most altcoins staged a strong comeback in the third quarter. BTC jumped from below $58,000 during the quarter and then bounced back to $87,300. Similarly, Ethereum jumped from $1,520 in July to a high of $2,796.

The crypto rally benefited Coinbase in various ways. It led to a surge in crypto ETF inflows, with Bitcoin funds adding over $6.2 billion during the quarter. This is a big positive for Coinbase, the biggest custodian of crypto ETFs.

The rally also boosted the mark-to-market value of Coinbase’s assets, which include coins like Bitcoin and Ethereum. Also, there are signs that the volume of all cryptocurrencies jumped, which helped to boost their transaction volume.

Still, despite these catalysts, analysts expect the results to show that its revenue dropped during the quarter. The average estimate is that its revenue fell by 34% to $1.22 billion during the quarter. Also, its earnings per share (EPS) is expected to come in at $0.07, lower than the $1.5 it reported in the same period last year. Coinbase has missed analysts’ estimates in the last three consecutive quarters.

Coinbase Insiders are Selling the Shares

These earnings come at a time when Coinbase insiders have been selling the shares, albeit at a slower pace. Data compiled by Barchart shows that insiders have sold 127,188 shares in the last three months. At the current price, these shares are worth over $20 million.

The insiders have sold over 1.36 million shares in the last 12 months. At the current price, these shares are valued at over $220 million. Some of the insiders who have sold shares include Alesia Haas, its CFO, and Marc Andreessen, one of the company’s earliest investors.

Insider sales are often viewed negatively by investors because insiders typically have privileged information that other investors don’t have.

Meanwhile, the company’s short interest has continued rising this year and now stands at 10%. The rising short interest is a sign that investors expect the stock will continue falling in the near term.

The options market suggests that the stock will be highly volatile after earnings. It has an implied volatility of 115%, much higher than the historical volatility of 60%.

A closer look at the options chain shows that it has more calls than puts. Most of the call options are concentrated at $170, much higher than the current $160. There is another call options cluster at $180.

Coinbase Stock Price Technical Analysis

The daily chart shows that the COIN shares have been under pressure in the past few weeks. It has formed a descending channel, which is part of a bullish flag pattern. It has also formed an inverted head-and-shoulders pattern, a common bullish reversal pattern in technical analysis. It is now in the right shoulder of this pattern.

Therefore, the stock is likely to see a bullish breakout after earnings. If this happens, the next important catalyst to watch will be $200, about 25% above the current level. On the other hand, a move below the support of $150 will invalidate the bullish outlook.

This article is for informational purposes only and does not constitute financial advice. Stock and cryptocurrency investments involve volatility and potential losses. Readers should conduct independent research before investing.