On February 13, MicroStrategy’s stock price experienced a notable surge, closing at approximately $133 following an 8.85% single-day increase. This rise also contributed to a nearly 5% gain over the week, showcasing resilience amid a broader market environment marked by uncertainty. However, this growth comes at an unusual juncture, as Bitcoin—an asset closely linked to MicroStrategy—saw a decline of around 2.2% during the same timeframe, introducing a gap that is not typical for these correlated assets.
Recent insights indicate that MicroStrategy and Bitcoin are trending closely together again, with a 7-day rolling correlation soaring to 0.98, signaling almost perfect alignment. This strong relationship suggests that future price movements for MicroStrategy could largely hinge on Bitcoin’s performance.
Compounding the situation, momentum indicators and volume signals are starting to display potential warning signs that the recent rebound in MicroStrategy’s stock may encounter headwinds. The rolling correlation, which gauges the similarity in movements between two assets over a specific time frame, reflects that MicroStrategy’s stock and Bitcoin are moving almost in tandem. A correlation of 0.98 signifies that price fluctuations in one asset frequently impact the other. Such a tight correlation poses a risk, particularly since Bitcoin has lost some ground recently while MicroStrategy’s stock has been climbing; historical patterns indicate that these discrepancies often correct themselves when the markets reopen.
In addition to this, the Relative Strength Index (RSI) suggests a hidden bearish divergence. This technical indicator measures the momentum of buying and selling by evaluating recent price gains against losses. Between early December and mid-February, MicroStrategy’s stock appears to be forming a lower high—contrasting with the RSI, which has shown a higher high. This phenomenon—known as hidden bearish divergence—indicates that while buying momentum may seem robust, the foundational price structure is weakening, suggesting that sellers might still be firmly in control.
A similar divergence was observed earlier this year, which preceded a nearly 14% drop in MicroStrategy’s stock. The current situation presents a repeat scenario. Traders are advised to monitor the key level of $133 closely; should MicroStrategy’s next trading session conclude below this threshold, the risk of correction becomes significant. Conversely, surpassing this level could diminish the bearish signal implied by the hidden divergence, allowing for potential further gains.
The behavior of institutional versus retail investors adds another layer of complexity to the situation. The Chaikin Money Flow (CMF) indicator, which tracks large-scale money movements, indicates that despite an overall decline in MicroStrategy’s stock since late November, institutional investment has actually increased, with CMF moving above zero. This suggests that larger investors are continuing to buy in, potentially insulating the stock from sharper declines during market sell-offs.
Conversely, retail investors appear to be trending negatively; the On-Balance Volume (OBV), which evaluates cumulative buying and selling activity, has shown a downward trajectory since November, aligning with the stock’s price drop. This indicates that smaller retail investors have been reducing their exposure. Currently, OBV is positioned near 972 million, and if it fails to breach this threshold, it could confirm a trend of retail weakness that may further escalate correction risks and affirm the developing bearish divergence.
The interplay between institutional buying and retail selling creates uncertainty regarding MicroStrategy’s price trajectory in the short term. For now, crucial price levels are guiding market expectations regarding future movements. On the downside, a key support level exists at $119, aligned with a 0.236 Fibonacci retracement, representing a possible 10% decline from current levels. A fall beneath this level could signal a deeper correction, suggesting a loss of seller control. Conversely, on the upside, the immediate resistance level of $133 needs to be broken, followed by $139, which has previously constrained rallies. A successful breakout above $139 could trigger renewed bullish momentum, potentially driving the stock toward $165 or even up to $190, especially if Bitcoin recovers.
The current situation for MicroStrategy stock is precarious. With its strong correlation to Bitcoin, its performance is closely intertwined with the cryptocurrency’s direction. Continuing weakness in Bitcoin could precipitate a delayed correction in MicroStrategy’s stock price, while ongoing institutional purchases and breakthroughs above resistance levels could revive a bullish trend, providing reasons for optimism amidst the uncertainty.
