Have you ever watched a stock you love get absolutely annihilated and felt that weird mix of panic and excitement at the same time?
That’s exactly where I am with MicroStrategy right now.
Since the summer highs, MSTR has been taken out back and beaten senseless – down roughly 67% while Bitcoin “only” fell about 30%. The leverage works both ways, and lately it has been brutal. But something interesting is starting to happen on the charts, and I’ve got my finger hovering over the trigger for what could be one of the cleaner rebound trades of the year.
Why MicroStrategy Remains the Ultimate Bitcoin Proxy (Even After the Bloodbath)
Let me be clear up front: I still believe MSTR is the single best way for stock-market investors to get aggressive exposure to Bitcoin without actually touching the crypto exchanges.
Yes, the balance sheet is unconventional. Yes, the premium to its Bitcoin holdings swings wildly. And yes, the stock can feel like riding a rocket with no seatbelt. But that’s exactly why it works so well when the tide eventually turns.
I’ve traded this name through multiple cycles now, and the pattern is always the same: Bitcoin corrects, MSTR gets destroyed far beyond rational levels, fear reaches maximum, and then – when almost everyone has given up – the thing explodes higher with terrifying speed.
We’re getting very close to that inflection point again.
The Technical Case Is Starting to Line Up Perfectly
I’ve learned over the years not to fight the tape, but also not to front-run too aggressively. Trying to catch the exact bottom in something this volatile is a great way to lose money fast. Instead, I wait for a cluster of signals to confirm that momentum is actually shifting.
Right now, we’re getting those confirmations one by one.
First, let’s talk about my favorite leading indicator for this particular stock.
The MACD Setup That Rarely Fails Me
Standard MACD settings are frankly too slow for a stock that can move 15-20% in a single day. That’s why I use a much more responsive version – the 5,13,5 configuration.
Just this past week, we saw a clear bullish crossover on this faster MACD. It’s not the final word by any means, but historically this has been an excellent early warning that the worst of the selling might be behind us.
In my experience, when this particular signal fires while the stock is this extended to the downside, the follow-through tends to be sharp and tradable.
The faster MACD acts like an early detection system – it catches the shift in momentum before most traders even realize the character of the market has changed.
RSI Is Doing Exactly What We Want to See
The daily RSI dropped below 30 – officially oversold territory – several weeks ago. That’s not particularly rare for MSTR, but what happens next is what matters.
Right now, we’re seeing the indicator curl back above 30. This “reclaim” of the oversold level is classic seller exhaustion behavior. It’s usually the first meaningful sign that buyers are stepping in to defend price.
I’ve traded enough of these setups to know that when RSI reclaims 30 after being deeply oversold in MSTR, the average 30-day return has been strongly positive in my backtesting.
The DMI Picture – Not Perfect Yet, But Getting Close
The Directional Movement Index is the one indicator still holding me back from being fully aggressive right now.
The -DI (red line) remains above the +DI (green green line), which technically means bears still have control of the trend. However, both lines are starting to converge, and the ADX is rolling over – exactly what we see at major turning points.
When the +DI finally crosses above the -DI, that’s usually when the real fireworks begin. We’re probably one or two strong up days away from that happening.
- MACD (5,13,5) → Bullish crossover ✓
- RSI → Reclaiming 30 from below → In progress
- DMI → +DI about to cross above -DI → Almost there
- Price approaching major support zone → Coming soon
The Exact Options Trade I’m Preparing
Given how quickly this stock can reverse, I never want to be flat when the turn finally comes. But I also refuse to buy outright shares or naked calls near the bottom – that’s how you get emotionally wrecked if we’re wrong about timing.
The solution? A defined-risk bull call spread that gives me 100%+ potential return if we get the bounce I’m expecting, while strictly limiting my downside.
Here’s the specific setup I’m watching:
Trade Structure: January 2nd expiry 170/175 bull call spread
Current approximate cost: Around $2.40-$2.60 per spread (depending on exact entry timing)
Maximum risk: Whatever you pay for the spread
Maximum reward: $5.00 minus premium paid (roughly 100% return if MSTR closes above 175 by Jan 2)
Breakeven price: 170 + premium paid (currently around 172.50)
This trade gives me about four weeks of time for the rebound to play out, which has historically been more than enough when these technical signals align.
Why This Specific Strike Selection?
People always ask why I don’t just buy cheaper out-of-the-money calls to swing for the fences. The answer is simple: I’ve learned the hard way that MSTR bounces tend to be violent but rarely immediate.
By buying the 170 call (slightly in-the-money or at-the-money depending on exact price when I enter), I get much better delta and much less time decay eating away at the position while we wait for confirmation.
Selling the 175 call caps my risk and pays for roughly half the cost of the long call. The net result is a position that behaves almost like owning 50 shares but with a fraction of the capital at risk.
| Scenario | MSTR Price Jan 2 | P&L Approximation |
| Bear case | Below 170 | -100% (lose entire premium) |
| Base case | 172.50 | Breakeven |
| Bull case | 175+ | +90-100% return |
| Home run | 185+ | Capped at ~100% (still amazing) |
Risk Management Rules I’m Following
Even the best setups fail sometimes. Here’s exactly how I’m protecting myself:
- No more than 2-3% of my trading capital on this single position
- Will only enter after DMI confirmation (the final piece)
- If we break below the recent lows before confirmation, the trade is off completely
- Taking partial profits on the way up – never letting a winner turn into a loser
- Willing to roll the position if we get a quick move but momentum stalls
These aren’t suggestions – they’re hard rules I’ve developed after getting burned in similar setups in the past.
The Bigger Picture – Why This Matters Beyond Just One Trade
Look, I get it – trading MSTR feels insane sometimes. The volatility is legitimately frightening, and the headlines can make you question your sanity.
But here’s what I’ve learned after years of doing this: the biggest profits almost always come from the stocks that make you feel slightly sick to your stomach.
When a stock has been destroyed this thoroughly, when sentiment is this negative, when almost everyone has written it off – that’s usually exactly when the smartest money starts positioning for the reversal.
The beautiful thing about options is they let us participate in these explosive moves while strictly defining our risk. We don’t need to be right about the exact bottom. We just need to be right that a bounce is coming sometime in the next four weeks – which, based on everything I’m seeing, feels increasingly likely.
I’ll be watching this setup like a hawk over the coming days. When that final DMI confirmation hits, I’ll be pulling the trigger without hesitation.
Sometimes the best trades are the ones that scare you the most. This feels like one of those times.
Trading involves substantial risk and is not suitable for every investor. The information presented here is for educational purposes only and should not be considered investment advice. Past performance is not indicative of future results.
