The bull run in Marathon Digital ($MARA) is over. Are you overstaying your welcome?
This is Dan Fitzpatrick, Stock Market Mentor. We took profits on Marathon Digital ( NASDAQ: MARA ) and MicroStrategy ( NASDAQ: MSTR ), they are really, really crypto trades.
I want to look at this in a few different ways. First of all, this ( NASDAQ: MARA ) is more of a longer-term thing that I drew a while ago. You can see that we’ve got this very, very long-term head and shoulder pattern here, it’s an inverse head and shoulder pattern, which is essentially tracing out a base.
This is a daily chart, I think the stock has further to go. It looks to me like it’s just broken out. The ADX line is working really, really well. We’ve got a nice positive really, really strong uptrend here, and expanding Bollinger Bands. And then boom!, here comes this week. This thing hit 30.00 and pulled back, it is down substantially today.
If you look at the volume here, the trading volume was really, really high. This was an impressive move, which is just the type of volume characteristics that you see in a blow-off top. Really, really steep volume after the stock has already had a big run.
Before this thing even really started to tick up, the stock had gone up about 50 percent just from this breakout level. So this was a correction just waiting in the wings to happen and we are finally getting it. The thing is though, you want to look at this in a longer-term view if you are a longer-term trader.
My measured move on this, I won’t go through the details, my measured move on it is, and has been, 36.00. That is not to say that it’s definitely going to get there but that is really the way I see it. I think this has further to go, but my suggestion is to do what we did today, which is to book some profits.
This has been a monster trade for us. I think we got 92 percent on it so I’ll take as many of those as I can get. This is the anchored volume weighted average price since its last earnings report. You can see that this was well above that VWAP and is still well above it, even at this time.
Do I expect more downside? Sure, I’m planning on more downside, I’m hoping for more downside. What I would really like to see is a complete retracement over the next several weeks, so that we get another reset here and we can start this deal again. We took profits today on a really, really nice trade, we started clear down here at 12.10 and then took some more here at 16.17.
MicroStrategy ( NASDAQ: MSTR ) didn’t get as big of a return on it, but our risk on the trade was really low. We started the trade and we were able to put a pretty tight stop on it. This is also one that I think is kind of done for a while. If you look at the weekly chart, it’s still running up strong.
The reason I think this didn’t pull back as much as Marathon Digital ( NASDAQ: MARA ) is that MicroStrategy ( NASDAQ: MSTR ) is a real company that has its core business outside of buying Bitcoin. It’s just that Saylor is an out-of-the-box thinker, and I get, from where he stands.
First of all, he runs the company so he can do basically whatever he wants. But the thing that companies do is, and they should, is they look and say, ”Alright we have cash, where is the best place to put our cash?” And of course, if they can’t think of anything, then they give it back to the shareholders and direct a special dividend.
But if they can invest it in new capital expenditures, research and development, stuff like that, that’s what they are going to do. But their whole rationale for putting money to work, wherever they put it to work is, they want it to increase the business, increase the value of the business as much as possible.
Well, what Saylor decided was, ”Do you know what? I don’t think we can do better than Bitcoin.” And it turns out that the guy was right. I think that the stock is really, really levered to Bitcoin. I’m not going to posit a notion, as far as which way Bitcoin is going to go when we get these ETFs, that’s for my buddy and compadre Scott McGregor.
Scott runs Crypto Market Mentor, and he’s been doing nothing but printing cash on a really, really great Solana trade, I think it’s Solana, it might be Solara. This is why I have Scott doing this stuff instead of me. I don’t know that stuff, I just buy Bitcoin and Ethereum and I’m done with it.
Anyway, I think MicroStrategy ( NASDAQ: MSTR ) is certainly likely to continue higher here. But the way I am looking at it as a trader is, this is kind of a 3-day reversal here. A big key volume day, a high-volume day. It hasn’t been this high in quite a while.
As you look at this I think it has maybe been surpassed by this day, 2.2 mil here, 2.1 mil, so an extra 100,000 shares, big whoop. This was a massive volume day, followed by a little bit of a reversal, a gap down. And then an immediate run up to a new high. Then finally, today, we get a gap up and then a run down to a new low. So this is a 3-day reversal pattern.
What I’m looking for here is, maybe kind of a sideways move with a couple of these things pulling back, something like that. And then ultimately, and hopefully, maybe the 20-day moving average reasserts itself here, something like that. The stock could indeed fall lower here, but if it does my sense is that you will look at a lot of traders that are going, “50-day moving average, I’m in.”
So this is the way I’d be trading MicroStrategy ( NASDAQ: MSTR ), I took profits on this today and some yesterday, and now you’ve got to just be patient. Don’t be so eager to get back into a stock that you made money on. Because if you time it incorrectly, you’re just going to give that money back, and who wants to do that?
Free Chart