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Posted February 27, 2025 at 4:17 am
1/ Key Support Test
2/ Defensive Sectors Gaining Strength
3/ TLT Shows Signs of Rotation
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Key Support Test: Can the Price Hold Above $200?
MicroStrategy Incorporated closes today’s session with a decline of –11.41%, accumulating a –16.41% drop so far this week and nearly –28% over the past two weeks. This downturn aligns with the recent drop in Bitcoin below $90,000, negatively impacting companies with significant cryptocurrency investments.
Over the past year, the company has substantially increased its Bitcoin holdings, reaching nearly 500,000 BTC acquired at an average price of $66,357 per unit. This strategy has been supported by debt issuances and stock offerings, including a recent issuance of 2.5 million preferred shares to fund additional Bitcoin purchases. Currently, $MSTR holds ~$8.2 billion of total debt for ~$43.4 billion of Bitcoin. They have a leverage ratio of ~19%.
Courtesy of StockCharts.com
Looking at the chart, we see an interesting support area, marked between the VWAP drawn from the December 2022 low and the blue-marked zone, which was a major resistance from 2021 to 2024 and now acts as support.
Given the strong correlation between the stock and Bitcoin (0.93), the lower chart displays the performance ratio of the stock relative to BTC. Why do we observe this ratio? To get an idea of the stock’s beta relative to Bitcoin’s movements.
For now, we are focusing on the blue support zone and waiting to see whether it holds or not.
Defensive Sectors Gaining Strength
Defensive sectors have been gaining momentum. A clear example of this is the new all-time high reached by the Consumer Staples Select Sector SPDR Fund (XLP).
During periods of economic uncertainty or market volatility, this ETF can serve as a defensive refuge, given the essential nature of the products and services offered by the companies in its portfolio.
Courtesy of StockCharts.com
The lower chart displays the price distance from its 200-period moving average, along with a 120-period moving average. Why is this useful? It helps us measure the recent price momentum, which, as we can see, has been positive over the last quarter.
However, XLP is not the only one gaining momentum—other defensive sectors have also shown growth over the past quarter.
Courtesy of StockCharts.com
TLT Shows Signs of Rotation
The iShares 20+ Year Treasury Bond ETF (TLT) gained +1.72% today, indicating that investors are betting on a potential recovery in long-term Treasury bond prices. We are beginning to see a possible rotation into bonds.
Courtesy of StockCharts.com
The price has finally broken through a key confluence zone, where the VWAP drawn from the 2023 low intersects with a six-month downward trendline. Additionally, the RSI has also broken out of a bearish structure, suggesting that we might be witnessing a shift in price structure.
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Originally posted 26 February 2025
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