Trading Strategies For MicroStrategy Before And After Q1 Earnings: Will Bitcoin Holdings Save The Stock?

MicroStrategy, Inc MSTR stock was dropping over 5% Monday as the company heads into its first-quarter earnings print after the close.

When software and cloud-based services company printed a massive fourth-quarter earnings miss on Feb. 2, the stock dropped slightly the following day and continued to decline over the five trading days that followed, losing about 18%

For that quarter, MicroStrategy reported a loss of $20.51, badly missing a consensus estimate of negative 13 cents.

For the first quarter, analysts, on average, estimate MicroStrategy will report an earnings loss of $1.28 per share on revenues of $119.04 million.

Ahead of the event, Berenberg analyst Mark Palmer initiated coverage with a Buy rating and announced $430 price target. The price target suggests over 30% upside for the stock. Read more here...

Traders and investors will be watching to see if MicroStrategy’s Bitcoin position has started to benefit the company’s top and bottom lines. Between Jan. 1 and March 31, Bitcoin surged 70%.

How MicroStrategy reacts to its earnings print will likely depend on whether it beats or misses and on its guidance. The company hasn’t reported an earnings beat since printing its fourth-quarter 2019 earnings Jan. 28, 2020.

From a technical analysis perspective, MicroStrategy’s stock looks bullish heading into the event, having settled into an uptrend pattern on the daily chart. 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.

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The MicroStrategy Chart: MicroStrategy reversed into its most recent uptrend on April 25 near the $280 level. On Monday, the stock was trading lower, possibly printing the next higher low within the pattern. If MicroStrategy receives a positive reaction to its earnings, Monday’s low-of-day will serve as a higher low and traders will then want to see the stock surge up over Friday’s high-of-day at $328.98.

• MicroStrategy could be forming a bull flag pattern within the uptrend, with the upwards sloping pole formed between April 25 and Friday and the flag forming over the course of Friday and Monday. If the pattern is recognized, the measured move is about 17%, which suggests the stock could rise up toward $358.
• If MicroStrategy suffers a bearish reaction to its earnings and falls under $304.71, the uptrend will be negated and a downtrend could be on the horizon. If that occurs, the stock may find support at $278.37, where it printed a double bottom pattern on April 6 and April 25.
• MicroStrategy has resistance above at $347.50 and $406.51 and support below at $305.60 and $252.02.

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