MicroStrategy surged early Monday but quickly lost momentum, forming a weak candlestick. With a looming death cross and fading Bitcoin correlation, analysts warn of further downside toward $240 as investor enthusiasm continues to wane.
- As you can see during the trading session on Monday, MicroStrategy gapped higher, shot higher after that, and then gave back a huge portion of the gains.
- Because of this, I think this is a situation where, as we gapped to the upside, we ran into a little bit of gravity.
- I'm not going to lie about this — the candlestick for the session looks pretty miserable. While we have not filled the gap yet, and the gap, of course, should offer a bit of support, the reality is that the market has struggled with the $300 level.
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The 50-day EMA is getting ready to break below the 200-day EMA, which is the so-called Death Cross. Breaking down from here would make a certain amount of sense because it would just be a continuation of the overall trend. It’s also worth noting that we are well below the 61.8% Fibonacci retracement level, which in general, for me, is a sign that we are going to do a round trip that opens up a move down to the $240 level.
All things being equal, this is a market that is typically associated more with Bitcoin than anything else. But it's also worth noting that the market has had some trouble with Bitcoin but not like it has with this stock. So, I think the jig is somewhat up for Strategy, which has made it a way to play Bitcoin a little easier for most traders who have since figured out there’s a Bitcoin ETF.
Bitcoin and MSTR are No Longer the Same Thing
So, in this environment, you have to ask what’s left of the business? It’s all been about arbitrage and playing Bitcoin. Over the course of the year, you can see that Bitcoin is up about 17.6% while the stock is actually down 12.8%. With that being said, I think you have to be very cautious with this stock, and it’s very likely that we will continue to see downside. While in the past Bitcoin has picked up MicroStrategy, the reality is it looks like that the correlation is breaking down.
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