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Publicly traded bitcoin mining company Marathon Digital has seen its share price drop along with bitcoin. So, does that make it a good buy?
The bitcoin price has fallen from its all-time high on November 10, 2021, and several publicly traded bitcoin mining stocks have seen their prices drop along with that. Marathon Digital Holdings (MARA) was no exception to this rule.
The last two earnings reports haven’t been his strongest showing, but Marathon has had a solid year in 2021 overall. On January 3, 2022, Marathon released its updates for the whole of 2021 and the month of December, including these highlights:
- Accumulated 3,197 self-mining bitcoins in fiscal 2021 (846% year-over-year increase)
- Total Bitcoin holdings increased to approximately 8,133 BTC
- The total cash in the fund was about $268.5 million
- 72,495 ASIC miners were added in 2021 (the current mining fleet consists of 32,350 active miners producing about 3.5 exhashes per second [EH/s])
Above is a bar chart of Marathon’s hash rate, global hash rate percentage and forecast for 2022 and 2023. The decline in Marathon’s global hash rate with its hash rate increasing indicates that its competitors have been expanding more aggressively than they were during this time. As Marathon continues to welcome miners from its Bitmain deal, it may need to be more aggressive in its expansion efforts.
Marathon has successfully built a new mining facility in Hardin, Montana, increasing the hash rate from 0.2 EH/s in January 2021 to 3.5 EH/s in December 2021. The next mining facility, located in West Texas, will be operational in the first quarter from 2022. If all construction follows schedule, Marathon will publish all purchased miners by early 2023; The operation will consist of 199,000 bitcoin miners, generating approximately 23.3 EH/s, making Marathon one of the largest publicly traded bitcoin miners in the world.
MARA سهم share price analysis
Like many of its peers, Marathon’s stock price is closely correlated with bitcoin prices. In March and April, Mara and Bitcoin jumped to new highs and when the price of Bitcoin plummeted in April, Mara’s stock fell as well.
In May and June, the MARA stock continued to move with the movement of Bitcoin: during the mining campaign in China, the price of Bitcoin dropped below $33,000, and the MARA stock collapsed by almost 40% during this time frame.
This summer’s price action didn’t end – with the launch of two Bitcoin exchange-traded funds (ETFs), Bitcoin hit a new all-time high and MARA followed suit. MARA is one of the only stocks next to Bitcoin that hit a new all-time high when Bitcoin did the same. This may indicate that the price of MARA is more directly related to the price of Bitcoin than other stocks next to Bitcoin. It is worth noting that while Bitcoin is down 40% as of this writing, MARA is down nearly 70% from its all-time high.
The main reason for MARA’s fourth-quarter decline was a subpoena from the US Securities and Exchange Commission (SEC), requiring Marathon to file documents related to the construction and financing of the Harden facility. On the day of this summons, MARA stock fell 27%. While nothing came of this subpoena, the markets made their verdict. This is the biggest candle on the daily MARA chart and it will hold quite a bit of upper resistance, but more on that later.
Marathon will share fourth-quarter earnings data in March. But a look back over the past three years helps paint a picture of how far Marathon has come and how far it remains to go.
Marathon’s third-quarter earnings missed expectations by 0.65 due to expansion efforts: building new facilities, buying miners from Bitmain and issuing new shares. These efforts along with the company’s HODL strategy (in effect since October 2020) have resulted in higher operating costs over the previous year. While it turns out that revenue is steadily increasing, there are positive signs that once these expansion efforts are over, and revenue continues to grow as expansions continue, earnings per share (EPS) should correct and help propel the stock higher.
MARA daily chart analysis, the stock has been in a strong downtrend (blue line) since hitting all-time highs on November 10th. While this downtrend has been going on for more than two months now, with some support areas emerging, we should see a break in this downtrend soon.
The significance of the short term highs/lows, gaps, candles and resistance are clues left by the big money on Wall Street on the chart. Analyzing the charts and their clues allows us to better judge how the stock will react in certain areas.
The chart below shows areas of support (red lines) and resistance (green lines). These support and resistance areas can be used as markers to determine when to buy and sell stocks. An example of the strategy is if the volume is decreasing as the stock approaches the red support line, taking a position (buying stocks) as close as possible to the support zone gives the trader more room to allow the stock to bounce back into a resistance zone. If volume increases as we approach and exceed resistance, a new support area is created and this will become the minimum exit price once stocks start to fall.
The colors indicate where our expectations should be if these lines are broken – if the stock breaks below the red support line, we will most likely continue lower, until the next support area (and vice versa for resistance areas). I have listed the support and resistance areas with the numbers corresponding to the line number on the chart.
- This area is our first line of defense in the sand. These are the lows from last week that are yet to be broken, the bullish gap and confirmed support from August and the bearish gap from May, which was previous resistance until mid-June
- This is a confirmed support area that has not been tested since late July, resistance and upside gap bottom in January, downside gap bottom and resistance in May
- The drop is from late July (this hasn’t been tested and can’t be anything, given its proximity to Zone IV). At least one of those will be support (likely a little higher, above 21m and close to where the close was instead of today’s low)
- The $20 price level is a psychological number that should prove the existence of a certain level of support. It is also close to the bottom of the elevation gap as of January 2021.
- Low May, which has not been tested
The main moving average lines that I would like to pay attention to are all above the current price level. These moving averages are the 21-day exponential moving average (EMA, the pink line), the 50-day simple moving average (SMA, the orange line), and the 200-day simple moving average (the white line) and they will all be resistance areas In the future.
- Low from the big red candle last Wednesday. Due to its size compared to other nearby candlesticks and higher trading volume of the day, there will be resistance somewhere inside this candle, and given the stock is unable to close inside the body of the candle, the bottom of this candle quickly became resistance
- The middle of this candle corresponds to the short-term low of December. This was also resistance at the beginning of July which led to a severe and sharp sell-off for 13 consecutive trading days.
- The top of the candle corresponds to the high it was on that day in July which led to the 13 day heavy selling. This could be another example that only one of these areas is real resistance.
- The bottom of the downward gap is from December 27 to 28. This is the same area where the 200 day simple moving average is currently located.
- The short-term high reached on Dec 27 was a failed attempt to break above the 21-day moving average. The top of the bullish gap from October 8-11, which was immediately tested as support. In the event that MARA breaks to the upside, the momentum generated by reclaiming the $40 price level should push the stock higher. Expectations for an additional breakout may be close to 80% once MARA breaks above $40.
- Next area of expected resistance around $45: short-term high reached in September
- The $50 price level is not far from the previous all-time high on Feb 17; Support area for the last two weeks of November
- All final resistance areas are connected to the biggest candlestick seen on November 15th (SEC call order date). The total for this candle is about 25%. This gives the stock a wide range to trade within without breaking out of its limits. This is the prime real estate of options trading for those who focus more on this style of trading.
Depending on where the chart is now, no traditional chart pattern has formed, which indicates that we are in the base-building period. Massive sales from the top are higher than most sales when building the base. The sell-off during this base build period is greater than the healthy norm, but given how volatile MARA has been over the past two years, that’s not unreasonable.
While there is no proper base and MARA is under a massive downtrend, it is not a buy at this moment. However, more aggressive investors can try to use the downtrend line breakout along with areas of support and resistance to help determine the outlook with the trade.