Technicals indicate a trading signal—does Coinbase present a buying opportunity?

Driven by positive factors such as the Federal Reserve's interest rate cut, last Thursday $Coinbase(COIN.US)$ surged 7%. However, this upward trend was disrupted by a three-day pullback, raising the question of whether COIN will continue to move sideways or enter a more pessimistic outlook. This week’s [Opportunity Express] will explore this issue with everyone.

Review of COIN’s Performance

Looking back at COIN’s performance following its Q2 earnings, trading revenue fell sharply by 39% quarter-over-quarter due to weaker-than-expected results. Additionally, expenses increased by 15% quarter-over-quarter, squeezing profit margins and triggering market pessimism, which caused the stock price to drop by 16%.

However, not all aspects of last quarter’s results were negative. For instance, within subscription and service revenue, the stablecoin business—accounting for over 50% of total revenue—benefited from growth in the average USDC balance, recording a 12% quarter-over-quarter increase in revenue. Furthermore, Coinbase’s platform advantages remain significant, with its paid membership service, Coinbase One, showing strong potential. The service currently boasts around one million members, with an annual fee of $49.99. By offering tiered privileges such as commission-free trading and higher staking rewards, it has created a stable source of income independent of market volatility. This is not just a single subscription plan but a key strategic initiative driving COIN’s transformation from a trading platform to a comprehensive financial services engine.

More importantly, COIN claims to be advancing its “Exchange of Everything” strategy, aiming to tokenize all assets and build an integrated on-chain trading platform. New products include tokenized real-world assets, stocks, derivatives, and additional spot cryptocurrency assets, putting it in direct competition with platforms like Robinhood, Gemini, and Kraken. These initiatives are crucial to COIN’s efforts to reverse the decline in trading revenue.

Based on this, in the previous session >>Key Takeaways - Coinbase Misses Earnings Expectations; Is Continued Stock Retraction an Opportunity?Mr. Niu shared a critical support level for COIN at $294, highlighting a potential rebound signal. Interested fellow investors can review the analysis again.

What are the reasons for investing in COIN?

Certainly, investors are now more concerned about whether COIN can continue to rebound. What are the reasons for investing?

First, the share price of COIN is highly correlated with cryptocurrencies. Rising cryptocurrency prices typically attract more investors into the market, increasing trading volume, which directly boosts COIN's revenue and profitability, naturally driving up its stock price.

COIN's CEO, Brian Armstrong, predicts that by 2030, the price of Bitcoin will rise to $1 million. He believes that regulatory clarity, increased government adoption, and substantial institutional demand are catalysts for Bitcoin’s continued rise. Armstrong is optimistic about the development of the entire cryptocurrency industry and considers COIN to become a "bank alternative" for users — not only for trading but also for payments, rewards, and everyday financial services.

Secondly, cryptocurrency investments are strongly correlated with the Federal Reserve's interest rate cuts. According to CME’s FedWatch tool, there is a 91.9% probability that the Federal Reserve will cut interest rates by another 25 basis points in October this year. Why is a low-interest-rate environment beneficial for COIN? As interest rates decline, it means that businesses and individuals have easier access to cheap capital, prompting hot money in the market to seek higher returns, shifting from safe-haven assets to riskier ones. Cryptocurrencies, representing high risk and high return, are more likely to attract investors seeking high yields.

In addition, COIN has recently been actively promoting product innovation, drawing significant market attention. First, it launched an on-chain USDC lending product with an annualized yield of up to 10.8%, which not only attracts users seeking stable returns but also effectively activates use cases for stablecoins. Second, it introduced an innovative 'hybrid index futures' combining tech stocks and cryptocurrencies, providing investors who wish to allocate across these two major hot asset classes with a more convenient tool.

Meanwhile, Bank of America emphasizes COIN’s diversified product offerings, considering COIN as the largest compliant platform in the U.S., occupying a solid position in the digital asset industry, and reiterating its target price of $369.

In summary, from a long-term perspective, COIN remains worth tracking by investors!

Is now an appropriate time to trade?

Technical Opportunities

So, is now an appropriate time to trade? From a technical perspective, first consider the weekly EMA12 and 50 moving averages. COIN still maintains an upward trend, with the stock price stabilizing near the EMA12 weekly moving average, showing relatively optimistic performance.

Based on the daily moving averages, the stock price surged last Thursday, with the EMA12 crossing above the 50-day moving average, forming a short-term bullish trend. A key support level has been established near the EMA50, with a reference price of $321. Typically, the support at the EMA50 is considered a relatively safe entry signal. However, given the recent pullback in cryptocurrency markets, negative impacts may persist, necessitating cautious observation. If the stock price can stabilize above this level going forward, the probability of an upward trend will increase further. Conversely, if the stock price subsequently falls below the EMA50 and the EMA12 crosses below the 50-day moving average (forming a death cross), a retracement trend may be underway, warranting vigilance.

Additionally, we can incorporate Fibonacci extension levels to determine rebound target prices. Taking the low point before the April uptrend as the starting point, the first phase rebound target for COIN is at the 23.6% level, corresponding to a target price of $365.

Of course, technical analysis is not infallible, and investors should consider multiple factors before making trading decisions cautiously (PS: The technical analysis in this article is for educational purposes only and does not constitute actual investment advice).

Options Strategy

For high-risk-tolerant fellow investors, in addition to investing in common shares, attention can also be directed towards leveraged ETFs or options trading instruments related to the stock.

For instance, if one is optimistic about COIN’s future performance, they could bet on a 2x leveraged ETF that tracks COIN's upward movement, such as $GraniteShares 2x Long COIN Daily ETF(CONL.US)$ ， $Leverage Shares 2X Long COIN Daily ETF(COIG.US)$ , while inversely, they could trade $GraniteShares 2x Short COIN Daily ETF(CONI.US)$ and similar ETFs.

The focus on options strategies is critical, especially since the stock price is currently under pressure from short-term fluctuations in the cryptocurrency market, necessitating more prudent choices. For example, if you already hold COIN shares, you could adopt a covered call strategy by selling out-of-the-money call options.

Additionally, one may adopt the Long Strangle strategy, which involves purchasing out-of-the-money call options and out-of-the-money put options, with contract expiration dates ranging between 30 to 45 days. The profit of this strategy stems from either the purchased put option when the stock price falls sharply or the purchased call option when the stock price rises significantly. Regardless of whether the price moves up or down, as long as the magnitude of the move is sufficiently large to ensure that profits from one side offset losses from the other, the strategy will yield gains.

Of course, if there is a clear short-term bearish outlook, one can directly purchase put options. For more information on options strategies, you can click here to focus on learning from this course >>[Options Strategies]

Risk Disclosure: This content does not constitute a research report and is for reference only. It should not be used as the basis for any investment decision. The information provided herein is not a comprehensive description of the securities, markets, or developments mentioned. Although the sources of the information are believed to be reliable, the accuracy or completeness of the content is not guaranteed. Additionally, no assurance is given as to the accuracy of any statements, views, or forecasts provided in this document.