Is There A Buying Opportunity In The Coinbase Stock?
2022.04.20 11:16
Who would have imagined that Coinbase (NASDAQ:COIN)’s IPO would end in such a disaster?
Most investors probably expected a lot from one of the largest crypto exchanges in the world. Since last April, the stock has fallen nearly -65%, a painful loss. Nevertheless, we see great opportunities in this company and would like to highlight the stock from an Elliot wave theory perspective.
Coinbase daily chart.
From a fundamental point of view, some factors negatively affect the stock. Some analysts estimate that in the worst-case Coinbase will only post marginal profits this year or even end 2022 with a slight loss. Various competitors such as Bitfinex or FTX recorded large increases in users in the past year compared to Coinbase. They offer more competitive commissions and trading rates.
At its IPO, Coinbase was also slightly overvalued, and the issue price of $381 was too high at the time. Large investors also saw it that way, and the stock came into massive distress due to increased short interest.
However, Coinbase has announced various investments and changes in recent months that give hope. The company is investing heavily in the market around NFTs, wants to offer derivatives in the future, and is expanding its cloud and staking offerings. The management aims to diversify its income streams so that other inflows are established in addition to the revenue generated from trading by its users.
The company has also announced that it will continue to invest heavily this year and the next, with investment amounts expected to reach several billion this year. The future will show if and how Coinbase can maintain and expand its growth.
Technical View
From a technical perspective, the stock has formed a clear ABC pattern. Since November, the stock has been in a severe downtrend in which a total of 5 different downward 1-2 wave setups have formed. These different impulses explain the rapid sell-off of the stock.
Our analyst team estimates that the correction could be over in a few weeks. Currently, the price has completed the orange impulse. Based on the turquoise wave (4), a surge towards $180-$190 is now very likely. Depending on the volatility, the stock can advance further in this upward correction.
Subsequently, we expect a final but harsh sell-off within the turquoise wave (5). The final target of the correction is difficult to estimate, but a final drop towards the region around $115-$90 is realistic.
In the long term, the selling volume in the weekly chart will slowly decrease, and the MACD can be used to determine a possible trend reversal. According to the Elliot wave method, Coinbase may reach new all-time highs near the $600 area in the future.
Despite all this, caution is advised in Coinbase for the next few weeks. We will inform investors about future price movements.
Coinbase weekly chart.
