Peter Brandt, a seasoned trader, has said that Coinbase International (COIN) has formed a head-and-shoulders pattern, possibly signaling a significant decline in the stock price.
This occurs at a time when the cryptocurrency market’s stock trading has advanced since before the SEC filed a case against competitor exchange Binance. Brandt simply stated, “Head and shoulders in $COIN,” in a tweet, referring to a technical bearish pattern that some traders use to predict a large market reversal.
The top and shoulders sample, which is used by chartists to predict value reversals, consists of three peaks, with the center peak being the best (referred to as the “head”) and the two edges’ peaks being almost equal. The sample crosses a neckline, which serves as a baseline, and is typically regarded as one of the most reliable patterns for pattern reversal. It serves as a warning that the asset’s value is about to decline from the neckline stage, probably in a significant manner. The sample is not validated, though, until the asset’s value breaks through the neckline.
In the case of Coinbase, the development of this sample suggests that the company’s recent stock gain, which was aided in part by BlackRock’s Bitcoin ETF filing, may be transitory. Since June 15, when BlackRock filed for a spot Bitcoin exchange-traded fund (ETF) with Coinbase serving as the custodian, the price of Coinbase stock has increased by more than 30%. The pinnacle and shoulders sample, however, may require dealers and merchants to prepare for a potential value decline.
While some market observers have focused on the probable pattern reversal, others see the current situation differently. Omid Malekan points out that Coinbase’s stock dropped in expectation of the SEC’s “Endgame” and adds that the market could not have faith in the plan’s success. Even while the peak and shoulders sample suggest a technical reversal, it remains to be seen how COIN will perform over the next few weeks and months because these forecasts are not always accurate, and the larger market context will surely play a significant role.