Here’s how I would trade the Coinbase IPO. $COIN – April 14, 2021COIN SNOW UPST
This is Scott with your Chart of the Day. I want to take a look at Coinbase ( NASDAQ: COIN ). Coinbase ( NASDAQ: COIN ) launched their IPO today and as you can tell from this candle it was definitely a wild day. I will break things down here to a short-term chart a little pop and then a big drop.
I typically don’t like to buy an IPO on day 1, it’s just not what I do. But I do have a strategy for buying a new issue. There are 2 entries that I like to make if I am looking at a stock that is just new to the market. I like to typically wait a couple of days for the stock to ultimately build a little sideways base of consolidation. We are getting some candles here, and so by doing that we can establish at least a short-term level of support and a short-term level of resistance.
Hypothetically, let’s say the stock settles out around there, you then at least have a level that you can use to define your risk off of if you are making an entry. You then, also, would want to know where the level of resistance is. And so I like to wait for a stock to kind of build a sideways range and then look for a break to the upside of that range. Another way that you can buy a new issue is, simply by setting an alert at the high of the initial candle and then wait for the stock to kind of take out that high.
We actually saw a pretty big move on Snowflake ( NYSE: SNOW ) back in the day when it broke its enthusiasm high, that’s what Dan Fitzpatrick calls it. You can see here Snowflake ( NYSE: SNOW ) kind of did what I was talking about; where it built a little sideways base of consolidation. And then you at least had some ranges that you could trade off of using some clearly defined levels of resistance.
But then another way is to just wait for it to take out that initial high. And when it does that, sometimes it takes a while, you can usually get a pretty good move off of the stock as it breaks into new high ground. There is no telling how long that move is going to last, but typically if a stock is breaking into new high ground you can get a pretty good move off of it. But then if it comes back into this zone you may want to consider getting out because it can then use that area as a clearly defined area of resistance and start to break down, you kind of get the idea.
Another one is Upstart ( NASDAQ: UPST ), that’s a new issue this year and you can see how it’s had a pretty good move out of its enthusiasm high. Once it kind of broke above that enthusiasm high it was really off to the races. And when it did breakdown look where it tested, it tested right around its previous enthusiasm high.
So like I said, I think that this level here on Coinbase ( NASDAQ: COIN ), this 430.00 level is key and pretty important for this stock. I think it is one that you definitely should watch, but also, watch for it to kind of build a sideways base of consolidation and give you some levels to trade off of before you start to go into a stock like this, because we don’t know where the bottom is. The bottom today is here, but it can definitely go lower.
So just as a safe way to trade a stock like this I like to wait for it to develop a little bit of a base or take out that enthusiasm high. There are 2 strategies you can use that could work here with Coinbase ( NASDAQ: COIN ).