Summary CleanSpark is in a bearish downtrend but trading in a proven demand zone, offering a good risk-to-reward opportunity. Momentum is currently bearish but showing signs of potential bullish reversal; volume suggests institutional accumulation. Relative strength is flat; CLSK has underperformed the S&P 500 since March 2024 but could outperform if it exits the demand zone. Fundamentally, CleanSpark is an efficient Bitcoin miner, expected to increase earnings and revenues, and holds significant Bitcoin on its balance sheet. CleanSpark Overview In this article, I will outline a bullish thesis for CleanSpark, Inc. ( CLSK ) the Bitcoin miner , based on my technical analysis approach using price action, momentum, volume, and relative strength. I will also provide some key takeaways from the most recent earnings call. I last wrote about CLSK in February 2024 and a lot has changed since then from a technical and fundamental standpoint. Chart 1 – CLSK Weekly with 30-wk EMA, Momentum, Volume, and Relative Strength www.stockcharts.com When I am considering buying a stock, I always start with the price action. I prefer to buy stocks that are in uptrends. I use the weekly time frame to remove the day-to-day noise or fluctuations, and I like to use the 30-week exponential moving average ((EMA)) as a trend measuring tool. If the stock is above its rising 30-week EMA, I think that the stock is in a bullish uptrend. Conversely, if the stock is below its falling 30-week EMA, then I consider that stock to be in a bearish downtrend. CLSK falls into the bearish downtrend camp. It is below its 30-week EMA, and that EMA is trending lower. That’s the trend analysis. However, there is a bullish argument to be made regarding the price action of CLSK. CLSK is trading at a previous supply/demand zone. Supply zones are defined as price areas on the chart where sellers have come in and sold or distributed their shares to others. This is usually large institutional investors that unload their shares because they feel the stock is now fairly valued or perhaps overvalued after its previous advance in price. Another reason for the selling could be that a significant event happened in the company, industry, or economy that caused the investment thesis to shift negatively. Demand zones are the opposite of supply zones. Demand zones are price levels where big money comes into the market to accumulate shares after the recent decline because they think the shares are now undervalued. Institutional investors only accumulate shares because they think that those shares will rise in the future and become fairly valued. The blue rectangle in Chart 1 shows the supply/demand zone for CLSK. You can see that the blue rectangle acted as a supply zone in July 2023 when price reached that level after advancement and then sold off sharply over the next three months. CLSK then rallied past the blue rectangle toward almost $14 in December 2023. Then CLSK declined in price and there was a change in sentiment. The blue rectangle turned from a supply zone to a demand zone. Buyers stepped in when CLSK approached the $6.50 level. CLSK then advanced to $24, rewarding those who bought at the now demand zone. This action was repeated again in late August, early September 2024 as the price declined into the demand zone. Buyers again were rewarded as the price advanced from $8 to $18. Now the question is, if you buy shares here at this level, will you be rewarded? Only time will tell, but buying shares here gives you a couple of advantages. First, this demand zone has been tested two times before, so you know it is valid. Second, you know where the bullish thesis can be proven false. That would be a close below the blue rectangle. If the price plunged below the blue rectangle, then I would believe the bullish case for CLSK has run into serious issues. CLSK offers a bullish risk to reward ratio at this level, and perhaps starting a small position in CLSK at this level isn’t the worst investment decision. As a trend investor, I prefer to buy stocks that show bullish momentum, and I use the Percentage Price Oscillator ((PPO)) to help me measure momentum. When the black PPO line is above the red signal line, then the stock shows bullish short-term momentum. Conversely, when the black PPO line is below the red signal line, then the stock shows bearish short-term momentum, which is what CLSK shows now. When the black PPO line has a reading greater than zero, that shows bullish long-term momentum. If the black PPO line reads less than zero, which it does now, then the stock has bearish long-term momentum. CLSK has bearish short-term and long-term momentum, which makes sense as it is trading below a falling 30-week EMA. You can see that the black PPO line is flattening out and perhaps is turning higher, which is bullish. The black PPO line may cross above the red signal line in a week or two if CLSK moves higher from here. That would be a start of bullish momentum, at least in the short term. Right now, CLSK has bearish momentum and at best it is starting to turn bullish. Volume is the next technical element I consider when buying a stock. I want to own stocks that the institutional money managers are accumulating for the reasons I mentioned earlier. The volume pane in Chart 1 shows red and black volume bars. Red volume bars show the number of shares traded that week when price closed lower for the week. Black volume bars show the number of shares traded that week when price closed higher for the week. Last week there was significant volume and price closed lower for the week and price was inside that demand zone. It is possible that the high volume shown by the red bar was institutional money managers accumulating shares of CLSK. Relative strength is my last technical element to consider when I am interested in buying stocks. I want to buy stocks that are outperforming the SP 500 index. The relative strength ratio helps me determine that. When the black relative strength line is rising, that indicates that the stock is outperforming the SP 500 index. If the black relative strength line is declining, then the stock is underperforming the SP 500 index. CLSK has underperformed the SP 500 index since March 2024. You can easily see how the relative strength line is lower today than it was back in March 2024. Right now, relative strength is flat against the SP 500 over the last month or so. If the stock takes off as it did in previous times when it exited the demand zone, then CLSK has a chance to outperform the SP 500 index, but that is just speculation. Right now, if you buy CLSK you are not buying an outperforming asset, but that can change at any moment. From a fundamental standpoint, CLSK is a mining company that is expected to increase their revenues over the next two years and increase their earnings as well. On the most recent earnings call , CLSK management spoke about their plans to reach the infrastructure target of 50 exahash which is their next goal after achieving 39.1 exahash at the end of the most recent quarter. This infrastructure capability allows them to validate and mine bitcoin more efficiently than other mining companies, and this efficiency goes straight to the bottom line, according to CLSK CEO Zach Bradford. The hash rate subject is challenging to understand in my opinion. This article here helps explain the importance of hash rates to Bitcoin miners and the Bitcoin network. My main takeaway from a fundamental standpoint is that CLSK is a miner that holds Bitcoin on its balance sheet. CLSK has 11,177 Bitcoins on its balance sheet as of February 28th. Their average cost per Bitcoin is around $34,000. If you are bullish on Bitcoin, CLSK offers you a proxy vehicle to invest in besides Bitcoin itself. As Bitcoin moves higher, CLSK should move higher due to the fact that its most important asset is the Bitcoin it holds on its balance sheet. As I mentioned in another article , Bitcoin should do well in the future due to the United States and other countries seeing Bitcoin as a strategic reserve asset. If my bullish thesis on Bitcoin proves false, then CLSK will continue to trend lower and eventually go out of business. Conclusion In summary, from a technical perspective, CLSK could merit a small position in a portfolio as it is coming out of a demand zone which has proven to be a good place to buy shares the last two times this demand zone was met. Buying at these levels gives you a good risk to reward opportunity. The momentum is bearish. Volume leans bullish, and relative strength is flat over the last month. From a fundamental perspective, CLSK is an efficient bitcoin miner that is expected to increase earnings and revenues over the next two years. It is investing in improving their infrastructure to be a more efficient miner. CLSK holds Bitcoin on their balance sheet and is a proxy for investing in Bitcoin. If you are a Bitcoin bull, starting a small position of CLSK at this price is not a bad idea.
