Marathon Digital Holdings, Inc (NASDAQ:MARA) and Riot Blockchain, Inc (NASDAQ:RIOT) were plunging about 10% and 7%, respectively, on Wednesday, in exaggeration to Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH), which were about .5% and 4% lower, respectively.
The crypto miners are effected by both the cryptocurrency sector and the general markets, which have been heavily bearish for the greater part of 2022, with little sign a large reversal to the upside is on the horizon.
Making matters worse, Marathon announced on Tuesday after the market closed that its mining operations have been impacted by a power outage caused by a storm that ripped through Montana a few weeks ago. The company hopes to restart operations at a reduced capacity in the first week of July.
Both stocks have plummeted from their 52-week highs, with Marathon nose-diving about 93% from its high of $83.45 and Riot tumbling about 90% from the high of $46.28.
When stocks decline greatly, retail traders and investors can sometimes be fooled into believing the bottom must be nearby. Unfortunately, stocks can always go lower, and both Marathon and Rio could be headed that way.
From a technical standpoint, Riot is holding up slightly stronger than Marathon, due to the former holding at its June 13 and June 16 52-week low of $4.34. In contrast, Marathon fell through support at its previous 52-week low on Wednesday, to trade at a level not seen since Dec. 15, 2020.
It should be noted, however, that events affecting the general markets, negative or positive reactions to earnings prints and news headlines can quickly invalidate patterns and breakouts. As the saying goes, "the trend is your friend until it isn't" and any trader in a position should have a clear stop set in place and manage their risk versus reward.
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The Marathon Digital Chart: Marathon has been trading in a steep and fairly consistent downtrend since March 28, when the stock topped out at $32.74, with the most recent lower high printed on June 24 at $7.76 and the most recent confirmed low formed at the $6.27 mark on June 16. On Wednesday, Marathon made a new lower low, confirming the downtrend is still intact.
- If Marathon closes the trading day near its low-of-day price, the stock will print a bearish kicker candlestick, which could indicate lower prices will come again on Thursday. If that happens, traders can watch for the stock to eventually print a reversal candlestick, such as a doji or hammer candlestick, to indicate an imminent bounce is likely on the way, even if that’s just to print another lower high.
- The bounce is likely to come over the next few days because Marathon’s relative strength index (RSI) crossed into oversold territory and is currently measuring in at about 29%. Despite the low RSI, the indicator has been making a series of higher lows, which has caused bullish divergence to occur on the chart, which also indicates a bounce is likely on the way.
- Marathon has resistance above at $5.70 and $7.79 and support below at $3.11 and $1.82.
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- If Riot falls below that support level and makes a new 52-week low, it will indicate a new downtrend is in the cards.
- Like Marathon, Riot is likely to bounce over the coming days because bullish divergence has developed on the chart. In Marathon’s case, the divergence is exaggerated, which occurs when a stock trades sideways but the RSI makes a series of higher lows.
- Riot has resistance above at $5.54 and $7.25 and support below at $4.36 and $3.30.
