How To Trade MicroStrategy Before And After Q3 Earnings: Will Michael Saylor's Bitcoin Focus Pay Off?

MicroStrategy, Inc MSTR stock was trading down Tuesday as the company heads into its third-quarter earnings print after the close.

When software and cloud-based services company printed a massive second-quarter earnings miss on Aug. 2, the stock surged almost 12% higher the following day and continued to trade higher over most of the six trading days that followed before topping out at $361.97 on Aug. 11.

Between that date and Tuesday, MicroStrategy has declined almost 27%.

For the second quarter, MicroStrategy reported a loss of $92.81, badly missing a consensus estimate of negative $7.27.

For the third quarter, analysts, on average, estimate MicroStrategy will report earnings per share of 27 cents on revenues of $127.58 million.

Ahead of the event, Jefferies analyst Brent Thill maintained an Underperform rating on MicroStrategy and lowered the price target from $180 to $175.

This is the first quarter since MicroStrategy founder Michael Saylor stepped down as CEO after 33 years in the role. Since the end of the second quarter, Saylor has held the position of executive chairman, focusing on MicroStrategy’s Bitcoin BTC/USD acquisitions and advocacy initiatives.

Traders and investors will be watching to see if Saylor’s Bitcoin strategies have started to benefit the company’s top and bottom lines. Between June 1 and Sept. 30, Bitcoin fell almost 40%.

From a technical analysis perspective, MicroStrategy’s stock looks bullish heading into the event, having settled into a possible bull flag pattern on the daily chart. The stock is trading in a confirmed uptrend.

It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

The MicroStrategy Chart: Despite the pullback on Tuesday, MicroStrategy has held above the eight-day EMA, which means the potential bull flag is intact. Traders can watch for the stock to break up from the upper descending trendline of the pattern on higher than average volume to indicate the bull flag was recognized.

• If MicroStrategy recieves a positive earnings reaction and breaks up from the flag, the measured move is about 32%, which indicates the stock could soar toward $345.
• If MicroStrategy suffers a bearish reaction to its earnings print, traders and investors will want to see the stock drop down under the $360.45 mark, which would negate the bull flag and the uptrend pattern.
• The stock reversed into its uptrend on Sept. 23 and has made a fairly consistent series of higher highs and higher lows. MicroStrategy’s most recent higher high was formed on Oct. 26 at $290, and if the uptrend continues, MicroStrategy should shoot above above the level over the next few days.
• MicroStrategy has resistance above at $305.60 and $347.50 and support below at $252.02 and $209.11.

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