Say what you will about enigmatic Bitcoin (BTC), but the cryptocurrency is up 55.7% in 2023. Crypto software stock MicroStrategy (MSTR) is faring even better, with a 148% year-to-date lead. However, as part of the broad market September swoon, MSTR is off by 1.4% this month. The good news is that if past is precedent, this pullback could have bullish implications for the Bitcoin-adjacent stock.
MicroStrategy stock in the last few weeks has fallen within one standard deviation of its 100-day moving average. According to Schaeffer’s Senior Quantitative Analyst Rocky White, there have been five other times in the last three years MSTR came within one standard deviation of its 100-day trendline after a lengthy stretch above it — defined for this study as 80% of the time over the past two months, and eight of the last 10 trading days.
Per those signals, the equity went on to average a one-month gain of 10.6%, with 60% of those returns positive. From its current perch at $353.20, a move of similar magnitude would place the stock around $387, its highest trading level in roughly a month.
Daily Chart of MSTR Since December 2022, with 100-day moving average
A short squeeze could also keep the wind at the shares’ back. Short interest fell 8.7% in the two most recent reporting periods, yet the 2.58 million shares sold short still accounts for 21.4% of MSTR’s total available float. At the stock’s average pace of trading, it would take three full trading days for shorts to buy back their bearish bets.
Options are affordably priced at the moment too. MSTR’s Schaeffer’s Volatility Index (SVI) of 58% ranks in the 1st percentile of its annual range, indicating low volatility expectations are unusually low right now—a boon for premium buyers.
