MicroStrategy’s Stock Soars to $1500 Despite Jim Cramer’s Advice

MicroStrategy’s stock (MSTR) recently achieved a remarkable recovery, reaching the $1500 mark despite warnings from CNBC’s Jim Cramer, who advised against buying the stock. This surge can be attributed to several key factors, including its inclusion in the MSCI index and the positive momentum in Bitcoin’s price. This article delves into the reasons behind this stock recovery, analyzing its implications for investors and the broader market.

Jim Cramer’s Advice and Market Response

Jim Cramer, a well-known financial commentator and host of CNBC’s “Mad Money,” recently advised his audience to avoid investing in MicroStrategy stock as a means of gaining exposure to Bitcoin. Instead, he suggested that investors directly invest in Bitcoin. Despite his advice, MicroStrategy’s stock experienced a significant recovery, posting gains of over 15% in a short period. This recovery was notably double the gains registered by Bitcoin during the same timeframe.

Inclusion in the MSCI Index

A major factor contributing to MicroStrategy’s stock recovery was its recent inclusion in the MSCI (Morgan Stanley Capital International) index. This inclusion is significant because the MSCI index is widely followed by institutional investors, increasing the visibility and attractiveness of MicroStrategy to a broader range of investors. Bloomberg ETF analyst Eric Balchunas described this inclusion as a “big deal,” highlighting its potential to drive increased investment in MicroStrategy.

Bitcoin’s Price Surge

Another critical factor supporting MicroStrategy’s stock recovery is the positive momentum in Bitcoin’s price. As MicroStrategy holds a substantial amount of Bitcoin on its balance sheet, the company’s stock price is closely correlated with the performance of Bitcoin. Bitcoin’s recent upswing from its range-low significantly bolstered MicroStrategy’s recovery. Key technical indicators, such as the 20-day Simple Moving Average (SMA) and the Relative Strength Index (RSI), flashed bullish signals, further supporting the stock’s upward movement.

Technical Analysis of MSTR

From a technical analysis perspective, MicroStrategy’s stock showed strong recovery signals. After peaking at $1999 in March, the stock had slumped to $1009 by the end of April. However, the recovery in May was steady, pushing the stock above crucial Fibonacci retracement levels. The stock’s price broke above the 20-day SMA, indicating increased buying interest. The market structure flipped bullish on higher timeframe charts, suggesting the potential for further upside.

The Relative Strength Index (RSI) underlined massive buying strength, supporting bullish projections for the stock. However, the Average Directional Movement Index (ADX) reading below 20 suggested that the price momentum was still neutral, indicating that investors should approach with caution.

Correlation with Bitcoin

MicroStrategy’s stock has shown a strong correlation with Bitcoin’s performance. The stock’s year-to-date (YTD) performance was up over 100%, compared to Bitcoin’s 50% gain. This correlation suggests that any extended recovery in Bitcoin’s price could further boost MicroStrategy’s stock. Bitcoin’s potential to reach its range-high of $71,000 could have a positive impact on MSTR, driving the stock higher on the price charts.

Implications for Investors

For investors, MicroStrategy’s recent recovery offers several key insights. The stock’s inclusion in the MSCI index enhances its appeal to institutional investors, potentially leading to increased investment and price stability. The positive correlation with Bitcoin suggests that investors seeking exposure to Bitcoin’s performance might find MicroStrategy an attractive option, especially given its recent gains.

However, it is crucial for investors to approach with caution. While the technical indicators and market momentum are currently favorable, the stock’s strong correlation with Bitcoin means that any significant downturn in Bitcoin’s price could negatively impact MicroStrategy’s stock. Investors should monitor both Bitcoin’s performance and MicroStrategy’s stock closely, considering the broader market conditions and potential risks.

Conclusion

MicroStrategy’s stock reclaiming the $1500 mark despite Jim Cramer’s advice is a testament to the company’s strong market fundamentals and positive correlation with Bitcoin. The inclusion in the MSCI index and Bitcoin’s recent price surge have been significant catalysts for this recovery. While the future looks promising, investors should remain vigilant and consider the potential risks associated with Bitcoin’s volatility. As MicroStrategy continues to navigate these dynamics, its performance will be closely watched by both institutional and retail investors.