Should you buy Coinbase shares after rallying 100% since the SEC charges?

On June 6, 2023, Coinbase, Inc. (NASDAQ:COIN) was charged by the Security and Exchange Commission (SEC) with operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency. Moreover, the charges extended to Coinbase failing to register the offer and sale of its crypto asset staking-as-a-service program.

In short – not great news a company wants to hear and bad news for its investors.

Indeed, the stock price gaped lower, opening at more than $10/share the next day following the June announcement. But, for whatever reason, most investors saw that dip as a buying opportunity. As such, Coinbase’s stock price is up more than 100% since the SEC charged the company with running an illegal operation.

Is this just a short squeeze, or new funds pour into the stock, hoping that a deal with the SEC will be struck?

Is it time to buy Coinbase stocks?

Coinbase’s stock price trades above $100/share for the first time since the summer of 2022. The rally extended after a federal judge ruled that Ripple, a major cryptocurrency, is a security when sold to institutional investors.

It means that, indirectly, exchanges such as Coinbase should benefit; thus, it was no surprise that the price increased.

YTD, Coinbase’s stock price is up +218%. But before getting too excited about this year’s performance, one should consider that in November 2021, so less than two years ago, the stock was trading above $330.

Hence, the recent rally can just be a short squeeze giving the opportunity for older stockholders to get out.

Technical analysis does favor more upside, though. A major resistance level is seen only at $200, so more upside is possible.

Also, one may spot an inverse head and shoulders pattern forming in the past twelve months. Such a pattern appears at the end of bearish trends, and if the stock price ends up trading above $120, then one should not be surprised if it tries its hand at the $200 level sooner rather than later.