Here’s your trade on Microstrategy ($MSTR) – March 13, 2024
Dan Fitzpatrick here at StockMarketMentor.com. We’re looking at MicroStrategy ( NASDAQ: MSTR ) today.
I sure wish I owned more of this, I own a little bit, but not enough to make this a fun video to do. I don’t get to do any, “I told you so or yippy, look at me.” I hope you are in a different boat, though. Here’s the thing, this thing just keeps going, and going, and going. I was in our training session that Scott McGregor, our Crypto Market Mentor, holds on Wednesdays. We were talking today about this, and I was just saying how Michael Saylor, the CEO of MicroStrategy ( NASDAQ: MSTR ), it’s amazing how this guy just continues to buy more and more Bitcoin. He has said that he doesn’t plan on selling any of it.
They are just buying it, not selling it. Scott had an interesting take on that, he knows a lot more about this than I do. He said that a while ago Saylor actually did an interview on this. He said, “Look, our underlying business, we’re not growing. We’re in the software business and we’re really not growing.” By the way, if we look at the fundamentals, which I did today during the class, if you look at the fundamentals you will see he’s absolutely telling the truth, not that he would have any reason to lie.
Anyway, he was saying how they’re just not growing. You look and their revenues are flat, their earnings are shoddy, if any at all. And so he said, “What we’re doing, we got a lot of money and I’m buying Bitcoin because it’s the best place I can put my money.” And then what are you going to do? “Well, I’ll buy more.” And what about after that? “Well, maybe what I will wind up doing is, if I need more I’ll issue some debt and then buy more.”
So the guy basically is using the company and the company’s stock as leverage to go out and buy more Bitcoin. And sure enough, today after hours, they announced a proposed private offering of 500 million bucks in convertible senior notes. So they are taking on more debt that way, and what do you think they are going to do with that money? Well, they’re going to buy more Bitcoin.
So what happens after the news today? The stock trades down, for crying out loud, almost $100.00, I think, at one point from top to bottom. Ultimately though, it winds up kind of flat, just down a little bit from where it was at the close. This is the kind of volatility that’s in this stock. It’s a very, very tough one to hold if you’ve got any kind of discipline. Now, if you’re a total gambler on my God, you’re having a blast with this thing. Just buy it and hang on until it bucks you off.
When it gets right down to it, this is an extremely risky trade to be in. It’s a massively risky trade to be in. So what am I telling you to do? Well, I’m not telling you to do anything, do whatever you want. But this is what I’m suggesting, if you think that Bitcoin is crap coin and this whole crypto thing is tulips and all that, then you definitely don’t want MicroStrategy ( NASDAQ: MSTR ) either.
On the other hand, if you really get the sense that maybe there’s a sea change going on in Bitcoin, I can’t speak to the rest of the whole Cryptocurrency thing. I distinguish between something where there are actually ETFs to trade, versus the rest of the crypto world. But if you think that this is going higher, as I do, if you think that’s going higher, then I think as stupid as this sounds, I think you can still buy this stock. You just have to have some kind of discipline with respect to how much you will to buy.
It’s not that you’d be concerned that the stock is going to tank and go down to $1,000.00. No, it’s more like what’s going to happen to your brain if the stock does pull back if you get one of these from top to bottom, a $275.00 move in a day? Is that going to cause your whole brain to go on tilt? Because that’s the kind of move that this thing has, it’s a very, very volatile stock.
My suggestion would be, if this is for you, if you want to ride the lightning, then what I would suggest doing is, using the 8-day EMA as a reference. Because the last time it was down that was clear back here. Then you are buying the stock here. You’re going down and you’re looking, okay, the exponential moving average is $337.00 below where I’m buying this now. It’s 19 percent so I’m really going to have to give this stock 20 percent. I am going to have to put a stop over 20 percent from where I bought this.
That seems like a pretty wide stop, and it is. But in just one day the stock went up over 10 percent. So the question is, is it really a wide stop? And my answer is, not for MicroStrategy ( NASDAQ: MSTR ). What you have to do is, you have to manage your risk by your position size, and what you’re expectation is if the stock moves $200.00 or $300.00 in a day. What are you going to do? Get that planned out in advance because if you don’t, then whatever you find yourself doing is probably going to be the wrong thing.
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