Why MARA’s Recent Sell-Off May Signal a Buying Opportunity

I’ve been tracking $Marathon Digital Holdings Inc(MARA)$ closely, and despite the initial sell-off following its wider-than-expected third-quarter loss, I believe there’s a compelling case for a potential reversal. The stock’s post-election rally faced a strong pullback after the earnings report missed expectations, but a closer look at the candlestick patterns and the overall market context suggests we could be witnessing a bottoming process.

Let’s start with the facts. MARA’s third-quarter earnings report showed revenue of $131.6 million, an increase from $97.8 million in the same period last year. However, it fell short of the $146.7 million consensus estimate. The company also posted a net loss of $124.8 million, significantly wider than the $76.3 million loss analysts had expected. Naturally, this kind of earnings miss can create panic selling, which we saw reflected in the sharp drop on Wednesday and Thursday.

Despite the disappointment on earnings, there are several positive takeaways that investors shouldn’t overlook. MARA added over 8,000 bitcoins to its holdings during the quarter, split between 2,070 bitcoins mined and 6,210 purchased. The company’s total bitcoin holdings now stand at 26,747, worth more than $2.4 billion at current prices. MARA’s decision to halt bitcoin sales and hold its newly acquired assets indicates strong confidence in the long-term value of BTC as a treasury reserve asset. This strategic pivot aligns well with the broader bullish sentiment surrounding Bitcoin, especially after former President Donald Trump’s election win, which the crypto industry perceives as favorable.

While the earnings miss triggered a sell-off, the technical signals on the candlestick chart suggest we may be nearing a reversal point.

MARA Daily Chart (Zoomed out)

MARA Daily Chart (Zoomed in)

Here’s what I’m seeing:

1. Wednesday and Thursday Sell-Off: The initial large red candles on these days indicate strong selling pressure. It’s understandable given the earnings disappointment, but the severity of the drop pushed the stock to oversold territory quickly.

2. Friday’s Hammer Candle: The standout feature of Friday’s trading session was the formation of a hammer candle. This pattern, characterized by a long lower wick and a small body near the top of the candle, is typically a bullish signal that indicates a potential reversal. The long lower wick shows that sellers initially pushed the price down sharply, but buyers stepped in with significant strength, pushing the price back up by the end of the session. This indicates that there’s demand for the stock at lower levels, suggesting a possible bottoming out.

3. What to Watch Next: For confirmation of a reversal, I’m looking for a bullish green candle on Monday that closes above the body of the hammer. This would provide strong evidence that buyers are taking control and could signal the start of an upward trend. However, if Monday produces a small red candle with a small body and short wicks, this could imply indecision, indicating a pause in selling momentum. Such a pattern might still precede a reversal if followed by a green candle with strong volume.

On the flip side, the worst-case scenario would be a bearish red candle on Monday that closes below the wick of Friday’s hammer. This would invalidate the reversal thesis and suggest continued selling pressure, potentially leading to further declines.

Donald Trump at Bitcoin 2024

The recent rally in Bitcoin and crypto-related stocks like MARA was sparked by the election of Donald Trump, who is seen as more favorable to the crypto industry compared to the previous administration. Bitcoin’s current price of around $91,400 marks a significant rebound, and with MARA holding a large amount of BTC, any continued upward momentum in Bitcoin’s price should have a positive impact on MARA’s stock.

The company’s new policy of holding all mined and purchased bitcoins instead of selling them reflects management’s confidence in the long-term value of Bitcoin as a strategic reserve asset. This decision should amplify the positive effects of any bullish trends in the broader cryptocurrency market.

My Take - Bullish Bias Until Proven Otherwise

From a technical standpoint, I’m optimistic about a potential trend reversal given the hammer candle formation and the current price action. The long lower wick shows that buyers are willing to step in at lower levels, providing a base of support. While I acknowledge the risks, especially if Monday’s session fails to confirm the reversal, I believe the probability of a bounce is high given the broader macro backdrop and the company’s strong stance on holding Bitcoin.

I plan to stay bullish on MARA for the coming weeks, keeping a close eye on Monday’s price action for confirmation. If we see a bullish green candle with strong volume, I believe it could trigger a broader rally, especially with Bitcoin’s continued strength. However, I’m also prepared to pivot if the reversal signal fails and the stock breaks below Friday’s hammer wick, which would indicate ongoing selling pressure.

What’s Your Take on MARA?

I’d love to hear your thoughts. Do you see a potential reversal in MARA’s recent price action, or are you more cautious given the earnings miss and current market volatility?

With Bitcoin’s price surging and the company’s decision to hold its assets, do you think MARA is a buy at these levels, or is it too risky to jump in right now?

Let’s discuss—what’s your outlook on Marathon Digital Holdings?

@MillionaireTiger @Tiger_comments @Daily_Discussion @CaptainTiger @TigerSG

Disclaimer: This is a general analysis and not financial advice. Always conduct your own research before making any investment decisions.