Software stock MicroStrategy Inc (NASDAQ:MSTR) has been sliding since its July 16, year-to-date peak of $457.22, made worse by a negative post-earnings reaction at the beginning of the month. Shares were last seen down 3.6% to trade at $375.23, but could soon stage a short-term bounce. Support lingers below at the $360 level, which captured pullbacks in May and June. Plus, the recent pullback has the equity running into the 80-day moving average, which has preceded bullish activity in the past.
Per Schaeffer's Senior Quantitative Analyst Rocky White, MSTR is within 0.75 of the 80-day trendline's 20-day average true range (ATR), after spending at least 80% of the last 10 days and 80% of the last two months above it. Over the past three years, 10 similar signals have occurred, and the equity was higher one month later following seven of them, averaging 16.9% gain. A move of similar magnitude would put the shares at $438.64.
Furthermore, short interest currently represents 9.8% of the stock's available float. This leaves plenty for a short squeeze, which could provide tailwinds for MicroStrategy stock.
When weighing in, options look like a good way to go. MSTR's Schaeffer's Volatility Index (SVI) of 53% sits in the low 5th percentile of its annual range, meaning options traders are pricing in low volatility expectations.
