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The stock of Robinhood (HOOD) has risen in response to a test of a crypto wallet

Robinhood Markets, Inc. (HOOD) saw its stock rise nearly 11% on Wednesday after the commission-free brokerage firm said that it will begin testing crypto wallets with a select group of consumers next month. If all goes according to plan, clients will be able to move specified digital currencies into and out of the Robinhood app in early 2022.

THE MOST IMPORTANT THINGS TO KNOW

Robinhood has announced that it would begin testing cryptocurrency wallets in October, with a full rollout planned for early 2022.

On growing volume, Robinhood shares broke above two weeks of consolidation, implying that further strong price action is on the way.

The bulls seek to defend this level after rallying from the lower trendline of an ascending channel.

Despite Robinhood’s expansion of its crypto capabilities, Coinbase Global, Inc. (COIN), a newly listed digital currency exchange, rose on Wednesday as investors shrugged off concerns about increased competition in the fast developing crypto trading and investing industry.

Let’s take a closer look at both equities and see what trading opportunities we may find using technical analysis.

Robinhood Markets, Inc. is a company that provides financial services to individuals and businesses (HOOD)
The company, which is best known for its commission-free stock trading, now allows cryptocurrency trading in popular coins like Bitcoin, Ethereum, Litecoin, and Dogecoin, but customers cannot move their digital assets to or from its platform. The addition of a wallet would assist Robinhood in attracting consumers who are looking for an all-in-one solution for investing in cryptocurrency rather than just speculating on price movement. Robinhood stock has a market value of about $40 billion as of September 23, 2021, and is trading at a 23 percent premium to its $38 IPO price. The stock has risen almost 10% in the last month.

After rising into the mid $80s just weeks after coming public, Robinhood’s stock dropped to just around $40 by early September, having given up over half of its gains. The stock broke above two weeks of consolidation on increased volume yesterday, which may re-energize the bulls. Those who buy at these levels could expect a retest of the all-time high at $85 while limiting risk with a stop-loss order placed just below the last consolidation region low at $39.23.

In technical analysis, consolidation refers to an asset fluctuating between a set of trading levels with a well-defined pattern. The term “consolidation” refers to a period of market indecision that ends when the asset’s price swings above or below the trading pattern.

Coinbase Global, Inc. is a cryptocurrency exchange company based in San Francisco, California (COIN)
Coinbase, which was founded in 2012 and serves as a fiat gateway and trading platform for approximately 70 million verified customers, is the top cryptocurrency exchange in the United States. Coinbase Pro currently uses a maker-taker fee mechanism to compute fees, while Robinhood gets a portion of the bid/ask spread. Coinbase recently canceled plans to launch a lending product because the Securities and Exchange Commission (SEC) threatened to sue, claiming that Coinbase’s proposed “Lend” offering was a securities offering.

After SEC Chairman Gary Gensler warned legislators last week that the agency is working to create a set of rules to supervise cryptocurrency markets, investors should be increasingly wary of a shifting legal climate when investing in equities with exposure to digital assets. Coinbase stock has a market capitalization of $63.34 billion and is now trading 3% below its $250 Nasdaq pre-listing reference price as of Wednesday’s closing.

Coinbase stock has been oscillating within an ascending channel since it bottomed out in mid-May, establishing distinct support and resistance zones. The stock has just rebounded from the lower trendline of the pattern, implying that the bulls want to defend this level. Active traders who establish a long position could consider placing a take-profit order anywhere north of $285 on the channel’s opposite side. If the price does not hold above the week’s low of $231.15, be prepared to leave with a slight loss.

The price movement between two upward sloping parallel lines is known as an ascending channel. This price pattern is defined by higher highs and lower lows. A lower trendline connects the swing lows, while an upper channel line connects the swing highs, forming an ascending channel.

At the time of publishing, the author did not own any positions in the securities mentioned.

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Written by Trevanna Gordon

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