Coinbase Stock Forms Island Reversal as Analysts Bet on a 16% Jump

Coinbase stock price has crashed into a bear market. It fell by over 27% from its highest level this year as concerns about its growth remained. This crash could be about to end as the COIN stock has formed the island reversal pattern and as Wall Street analysts remain bullish.

Coinbase Stock Price Has Formed an Island Reversal Pattern

The daily chart shows that the Coinbase stock price has remained in a bear market. It’s been in this phase since July, after it published a weak earnings report.

On the positive side, the logarithmic chart shows that the stock may be on the cusp of a strong bullish reversal. This may push it to the year-to-date high.

The first main pattern is the island reversal, which has been forming on the daily timeframe chart. This pattern, which has been created since the crash, is characterized by an isolated price cluster. This pattern usually leads to a bullish reversal as bulls attempt to fill the gap.

COIN stock price has also formed what resembles an inverse head and shoulders pattern. It comprises a head, two shoulders, and a neckline. It is now in the process of creating the right shoulder.

Coinbase stock price has also found support at the 50-day Exponential Moving Average (EMA). It is slightly above the 100-day average, indicating that bulls are in control.

It has remained above the Major S&R Pivot Point of the Murrey Math Lines tool. Therefore, the most likely forecast is where the stock rallies and hits the extreme overshoot at $437. Such a move will imply a 37% increase from the current level.

Conversely, dropping below the psychological level of $200 will invalidate the bullish forecast. This will also point to more downside in the near term.

Analysts are Bullish on the COIN Stock

One potential catalyst for the stock is that Wall Street analysts expect it to rebound in the next 12 months. Data compiled by TipRanks shows that the average estimate among 28 sell-side analysts is $376. It is about 16% above the current level.

The most bullish analyst is Gautam Chugani from Bernstein. He sees the stock soaring to $510, representing a 54% surge from the current level. Brett Knoblauch, a Cantor Fitzgerald analyst, is also highly bullish and has a target price of $500.

The other highly bullish analysts are from Benchmark and Bank of America. Most of these analysts cite Coinbase’s substantial market share in the cryptocurrency industry, especially in the United States. There, it is the most popular company among retail and institutional investors.

Analysts are also optimistic that the third-quarter earnings report will be much better than the second quarter. The average estimate among analysts is that Coinbase’s revenue will grow by 46% to $1.7 Billion.

Coinbase’s custody business is gaining momentum from rising ETF inflows. This trend boosts demand for secure crypto storage solutions. The SEC may soon approve spot altcoin ETFs for assets like XRP and Solana. Such approvals could further strengthen Coinbase’s position in the market.

ETF approvals will benefit the company as it is the most common custody platform in the US. Coinbase could benefit from the Federal Reserve’s expected interest rate cuts.

Lower rates often push investors toward riskier assets like crypto and equities. This shift may boost trading volumes and investor activity on the platform.

Still, Coinbase stock has some risks that may push it higher in the long term. One of them is that competition is rising, which may force it to slash its fees, affecting its margins.

The other risk is that the company is highly overvalued, with the forward price-to-earnings ratio of 40. It is much higher than the sector median of 12. In some instances, overvalued stocks tend to pull back, especially when their revenue growth falters

The other risk is if the upcoming interest rate cuts don’t lead to a crypto market rally since they have already been priced.