How We Used Technical Analysis to Predict the 27% 1-Week Rally in Coinbase (Fibonacci Retracement, Volume Profile)

How We Used Technical Analysis to Predict the 27% 1-Week Rally in Coinbase (Fibonacci Retracement, Volume Profile)

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Coinbase made a massive move this week that few saw coming — but for subscribers of the Rebel Roundup and Market Outlook, this move went exactly according to plan. How is that? They didn’t have a crystal ball. They didn’t have a time machine. They didn’t have inside information. But what they did have was several pieces of overlapping technical analysis, that gave us a strong upward bias in this name over the past week. And with the help of the incredible leverage that options provide, they were able to skew probability firmly in their favor for this move — leading to a powerful, successful trade if they followed the analysis within the Rebel Roundup and the Market Outlook.

What is the Rebel Roundup?

The Rebel Roundup is Market Rebellion’s daily options trading newsletter. We know — there are plenty of “stock market” newsletters that go out every day from a variety of stock market websites. We’ve seen them all — and we strived to make ours the best one. I can say with confidence, as a professional trader who takes hours every day to craft this newsletter, it’s my firm belief that this is the only daily trading newsletter one could ever need. That’s because most newsletters are just that — letters with a few short paragraphs about stock news that has already happened, with clips from articles that already exist across the internet. We do a bit of that too, but the Rebel Roundup takes it a step further, with a variety of options trade ideas, fresh unusual options activity, technical analysis, chart breakdowns, as well as weekly coverage of a slew of ever-changing hedge fund price targets across dozens of stocks. 

As an example, on January 31st, 2024, the Rebel Roundup used unusual options activity and short-term, high leverage OTM options to capture META’s overnight earnings rally — a rally that turned out to be the largest 1-day gain in market cap in stock market history. Capturing the largest market cap move in history with the most aggressive type of trade is an achievement that we’re very, very happy to call ours. Right now, you can try the Rebel Roundup for free for three months by visiting this link, no credit card or payment method required. Just drop your email in, and see how you feel about it. 

Coinbase Technical Analysis From the Rebel Roundup

Here’s how we used technical analysis to predict this exact move in Coinbase, including a variety of fibonacci retracement levels, support and resistance, volume profiles, parallels to Bitcoin, and more.

To start, we’ll note that we weren’t always bullish on COIN. As an options trader, I believe being a “permabull” or a “permabear” in any name is a recipe for disaster — and honestly it’s just plain lazy. The better approach is to stay nimble, and to constantly take in new outside information as you build your trading thesis. Case in point: Following COIN’s short-term top after the Bitcoin ETF announcement, Market Rebellion spotted bearish UOA in this name, and we acted on it immediately, using the trade ideas below featured in 3@3 Pro.

Here’s how that worked out:

In short, we identified the UOA in $140 strike puts with COIN trading at $145.17 on the 11th of January, legged into a short $130 put to turn the whole trade into a vertical put spread which took all but $1.00 of risk off the table, and then closed the spread on the 19th with COIN trading at $118.61, allowing us to lock in a gain of $5.95 while only risking $1.00 for all but one day of the trade’s life cycle.

However, this is where things got really interesting. We cut this trade here for a very specific reason — we felt as though this was a key support for Coinbase shares. We identified this in the Rebel Roundup on the same day we closed that position, drawing this key level across the COIN chart:

In this chart, posted on January 19th at 1:41PM, we identified two things: The first was a purple band of support which the stock had tested and successfully held — this was support during May of 2022, resistance during the Fall of 2022, resistance in July of 2023, and was a finally broken out of in November of 2023 during the hype phase of the Bitcoin ETF launch. This was a very clear support candidate for the stock after it began following once the Bitcoin ETF’s officially hit the market. The second thing we identified is that the RSI of COIN during this period was trading at nearly oversold — and for COIN, readings lower than this one were actually quite rare.

Ten days later, on January 29th at 2:18PM, we issued this piece of updated technical analysis in the Rebel Roundup. Here’s a screenshot from that particular section:

In the above screenshot from the January 29th edition of the Rebel Roundup, with COIN trading at $133.00, we take a full overview of COIN’s history as a publicly traded stock, laying out a fibonacci retracement roadmap over the top of the chart. We identify that the weekly candles respected the red 0.236 level, closing above the level on three consecutive retests. We also see that the stock never violated the purple support zone at $114. On top of that, we can see that despite a four-week sell-off that felt quite vicious, COIN was actually still trading in an uptrend. We charted this by identifying the series of highs and lows, with all lows moving consecutively higher than the previous low, and all highs moving consecutively higher than the previous high. 

With all of that in mind, we began to flesh out a trading roadmap for traders brave enough to jump into COIN. We said,

“Despite the recent pullback, Coinbase has not broken any technicals, and if this trend of “higher lows” and “higher highs” continues, Coinbase will likely surpass the recent $187 high without difficulty, forming its next “higher high” at the $220-$230 level, which was previously support and has not yet been tested. To participate in this upside, you could consider using mid-dated call options (something in the 3-month-to-expiration zone), using the $110 level as a hard stop-out (the area that, if COIN trades to, you cut the trade for a loss), and you would seek to roll or trim profit at $180, ultimately closing the trade at $220.”

This was the first instance, January 29th with COIN trading at $133.00, that we identified publicly the $180 level as a price target. But it wouldn’t be the last time.

On February 9th, we dove even deeper into the COIN analysis, with a fully fleshed out trade idea in the Rebel Roundup and the Market Outlook which featured the following theses:

  • Firstly, Bitcoin had broken out from a very important volume shelf, found below:

While we weren’t making a direct trade in Bitcoin, the thesis here is that COIN is closely tied to the performance of Bitcoin. In the above chart, it’s important to note that the volume profile is a key metric to track when spotting key areas of support and resistance in a stock. The volume profile is a representation of how much volume a particular price has experienced — higher volume represents a higher likelihood that support could be found there, while gaps in volume represent an easier path of movement. The volume profile above covered the last 200 daily candles in Bitcoin as of February 11th, and was posted in the Market Outlook. The same analysis was performed on February 9th in the Rebel Roundup. 

  • Find that parallel between COIN and BTC here, in this chart which features Coinbase and Bitcoin overlaid:
  • Now, we once again in this analysis brought back our old fibonacci chart with updated prices. That chart showed that we were far past the point of simply “confirming” support at the $125 lowest fib level, and were well on our way to tagging the next upper level, which was also the pivot high from the Bitcoin ETF launch.

With COIN trading at $140.80 on February 9th at 3:10PM, we asked traders to consider using the April 19th expiring $150 strike call options in COIN, which were (at the time) trading for a mid price of $18.53. 

Now, why the April 19th expiration? Are we just picking a random date out in the future? No. This date had a key importance behind it. As we noted, Bitcoin and Coinbase shares often trade in tandem with one another. And as we saw during the Bitcoin ETF run-up, COIN has shown that it is vulnerable to a “buy the hype, sell the news” trade thesis. So this April 19th expiration becomes an extremely important date for this Coinbase trade idea because April 19th is the date of the Bitcoin halving.

The Bitcoin halving is a catalyst that is often seen as bullish for Bitcoin. During the Bitcoin halving (which happens once every four years), the reward for Bitcoin mining is cut in half. This time, it will reduce the total reward to 3.125BTC. So by selecting April 19th as our expiration, we gave ourselves an extra “out” for this trade — an extra boost, an extra catalyst, an extra “reason to rally.”

This was largely done to help shield us from the potential of a sell off on Coinbase’s earnings, which occurred on the following Thursday. With regard to this, in the Market Outlook, we said, 

“Coinbase’s earnings will be released on Thursday this week. That gives COIN an opportunity to either rally even further, or to pull back. In either case, I expect positions targeting April 19th will be able to perform well over that timeframe.”

Had we selected option weekly’s, we would have increased our potential reward (considering the options would have been cheaper to buy), but we would have also lowered our probability of success considering we didn’t know what would happen during COIN’s earnings.

Well, on Thursday, we found out — COIN’s earnings were exactly the boost that we needed to take this stock to our first price target, and to set a new “weak” higher high in the stock thus far. 

That meant the $150 strike April 19th call options that we identified on February 9th, at $18.53 surged as high as $51.00 during the day session (which saw COIN trade up to above $190), before closing the day at a mid-price of $40.37 — a gain of $2,184 dollars (+$21.84 in option premium), AKA a gain of +118% using at-the-money options that still gave us more than two months to be right! 

In other words, by stacking up technical indicators, levels of support and resistance, upcoming catalysts, fibonacci retracement levels, volume profile levels, and even monitoring parallel charts like that of Bitcoin, we’ve managed to get OTM/short-dated-type performance over a 5-day span from options that were actually relatively long-dated. 

Moreover, this trade, the META trade which took place before that (inside the Rebel Roundup), and many of the other trades that we talk about every day at Market Rebellion teach us an important lesson: There’s a sect of market participants — of traders and investors, who really, honestly believe that consistent trading success is impossible

Don’t believe me? Give it a google search and you’ll see what I mean. People particularly love to reference shoddy studies from non-U.S. markets performed more than a decade ago, like this one in Brazil from 2013 which tracked traders who traded Brazilian equity futures, or this one which tracked Taiwanese day traders from 1993 to 2005. There are articles across the web which cite these outdated and frankly flawed studies to conclude that “trading is a get rich quick scheme” or to say that, “day trading is not worth pursuing.” Forgive me for being so blunt, but these are stupid opinions being purported as fact. There’s a real, concerted effort to make you, the individual trader, believe that trading in the stock market is simply, “too hard” for you to understand — too difficult for you to profit from. 

I’m here to tell you that if you’re willing to put in the time, the effort, and the discipline — trading is not “too hard” for you to figure out, to profit from, or to be successful in. And you don’t have to pay anyone to get started in your trading journey. There are a large variety of free resources you can use to become a better, more well-equipped trader. Directly on our website, under the education tab, we have a free education center crafted by professional options traders featuring a wide-spanning glossary of hundreds of options and stock market terms, indicators, strategies, technical patterns, and more. That’s free. We have a long list of handcrafted articles featuring all manner of evergreen trading tips and tricks, as well as original analysis — those are free to read as well. Every Monday through Thursday, Market Rebellion co-founders Jon and Pete Najarian go live for 30 minutes to break down the day’s market action, to talk UOA, and even to talk sports in their show The Rebel’s Edge. That’s free too.

If you gain nothing from reading this article where I break down how we traded COIN all the way down to a specific price target — caught the bottom, and then traded it all the way back up to a specific price target — I want you to just know that trading is possible. This is far from the only time we’ve done this.

If you were ever discouraged about your future in trading, or hit a bad streak and questioned whether this is really a good fit for you — Do. Not. Give. Up. It may not be easy at first, but you can do this. And we have the tools to help you get there. I really believe that an amazing place to start is with this free trial of the Rebel Roundup, where we isolated the trade above — I truly think it could help you to trade smarter, whether you’re a beginner or a seasoned professional, and if it doesn’t, you can always just unsubscribe.

Whether you try the Rebel Roundup or not — we at Market Rebellion will continue to support the individual trader in their battle against the Wall Street elite, providing as many tradeable insights as possible along the way, and we hope you stay with us as we continue that journey.

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