The company that provides business intelligence, mobile software, and cloud-based services, MicroStrategy Incorporated (NASDAQ: MSTR) seems to be ready for a surge as per its latest charts.
Bullish Indications
#1 Ascending Triangle Pattern Breakout: The daily chart shows that the stock had recently broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern and is marked on the daily chart in purple color. A breakout from an ascending triangle pattern is a possible bullish indication.
Daily Chart – MSTR
#2 Trading Above MAs: The stock is currently trading above both its short-term moving average of 50-day and the long-term moving average of 200-day SMA, which implies that the bulls are currently in control. This is a possible bullish sign.
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color).
This is typically considered a bullish signal.
#4 Bullish ADX: The ADX line has currently moved up from below –DI and +DI lines. The +DI line and the ADX line is also currently above –DI line. This indicates possible bullishness.
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#6 Breakout from Consolidation Area: The weekly chart shows that the stock was trading within a range since the past several months. This indicates consolidation. The consolidation area is marked as a purple color rectangle in the chart. A breakout from this consolidation area generally indicates bullishness.
Weekly Chart – MSTR
#7 Bullish MACD: In the weekly chart as well, the MACD line is above the MACD signal line, which indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for MSTR is in two scenarios.
- If the stock corrects to the support level of the ascending triangle breakout, at around $150.
- If the stock trades above yesterday’s high at around $177.
TP: Our target prices are $185 and $200 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $131.00 (for entry near $150.00) and $172 (for entry near $177.00). Note that this stop loss is on a closing basis.
Our target potential upside is 5% to 33% in the next 3-5 months.
- Entry at $150.00: For a risk of $19.00, the target rewards are $35.00 and $50.00. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry at $177.00: For a risk of $5.00, the target rewards are $8.00 and $23.00. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
— Tara
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