MicroStrategy, a Virginia-based business intelligence company that’s become more famous recently for its bold Bitcoin strategy, has been experiencing substantial volatility. The company’s stock price has been on a rollercoaster ride, taking investors on an emotional journey. For those seeking to approach the situation strategically, this article will explore how to trade MicroStrategy’s current downturn, as well as identify crucial levels every investor needs to watch.
One cornerstone of any trading decision should be a comprehensive understanding of what you are getting involved in. For MicroStrategy, the recent plunge is tied to its huge investment in Bitcoin. Since the company’s stock now closely follows the cryptocurrency’s movements, it’s imperative that investors keenly observe the overall direction of the Bitcoin market.
Firstly, consider the Medium-Term Trading Range. Over the last few months, MicroStrategy’s stock price experienced significant peaks and valleys, creating a distinct trading range. The proper approach in this scenario is buying near the low end of the range and selling at the high end. Therefore, keep a close eye on these levels: the $580-$600 range marking the low end, and the $620-$650 range, which could represent a level of resistance. This technique is an effective tactic that could possibly work well for swing traders looking to take advantage of medium-term price oscillations.
Secondly, watch out for the 200-Day Moving Average. A widely accepted rule among traders is that if the price is above the 200-day moving average, the asset could be in a long-term uptrend. However, if it’s below, it indicates a possible long-term downtrend. Notably, MicroStrategy recently fell below its 200-day moving average, indicating that the stock might face downward pressure in the near future.
Thirdly, understand the relationship between MicroStrategy and Bitcoin. With MicroStrategy’s shares fluctuating in sympathy with Bitcoin’s movements, those interested in trading MicroStrategy should also keep an eye on this cryptocurrency. As such, notable levels for Bitcoin, like $30,000 or $60,000, need to also be noted given it could act as significant support or resistance levels for MicroStrategy’s share price.
Fourthly, the psychological support barrier should not be overlooked. At present, MicroStrategy’s stock lies slightly above the $500 level. This figure represents a significant psychological barrier that, if broken to the downside, could result in a rapid decline for the stock. So, investors should watch this level as it could signal the beginning of a larger downward move.
Lastly, consider the financial health of MicroStrategy itself. The performance of company fundamentals such as earnings per share, revenue growth and cash flow stability are vital considerations. If these fundamentals deteriorate, it puts downward pressure on the stock, regardless of the performance of Bitcoin. Thus, always stay informed about the company’s quarterly earnings reports and financial health.
Trading in a volatile market requires careful planning and keen observation. For those contemplating trading MicroStrategy, these suggestions provide strategic steps to understand and navigate the precarious terrain, and the identified levels offer critical points to monitor. However, investors should remember these are only guidelines and not a foolproof strategy in an unpredictable market. Always conduct a rigorous analysis before making decisions, and don’t hesitate to seek advice from an experienced financial adviser if needed.
