Good afternoon, everybody. JD here with your Rational Trader market analysis daily.
In today’s video, I’m going to walk you through a potential short-term setup that caught my attention — not because of what Bitcoin’s doing right now, but because of what one stock tied to Bitcoin just did.
Whether or not you follow crypto, stick with me — this is really a mean reversion play, and it could be a big opportunity if the rubber band snaps back the way it has before.
Let’s get into it.
The Setup: MicroStrategy (MSTR)
I’m talking about MSTR — formerly known as MicroStrategy, the name was recently changed to Strategy Inc.
This is one of those weird stocks that trades like a leveraged ETF on Bitcoin, because they’ve bought so much of it. So when Bitcoin moves, MSTR moves — and sometimes even more aggressively.
The last time Bitcoin was up around $111,000, MSTR was trading around $415.
But it’s sold off from that peak in mid-May — as has Bitcoin — and that’s brought MSTR down into a really interesting technical zone.
It Almost Triggered a Buy in My System
Now, in my Two Sigma system, I’ve got a rule: when a stock trades two standard deviations below its 20-day average, and it meets our fundamental filters, that’s when we get a Green Diamond — and I start paying attention.
MSTR got close to that level. It didn’t quite trigger a buy, but it’s was close to the zone.
So what do you do when something gets close, but not quite there?
A Speculative Option Play (With Defined Risk)
If you’re looking for a high-risk, high-reward trade, here’s one way I’m thinking about playing it — and again, this is not advice, just an idea for educational purposes.
You could look at the $395 call expiring this Friday — that’s the June 6 weekly. Earlier today, that option was trading around $2.
Now, if Bitcoin bounces and MSTR runs back up toward $415 — like it did last time Bitcoin was at $111K — that option could be worth around $20. From $2 to $20, that’s a potential 10x return.
Of course, the flip side is also true: if it doesn’t move, or moves too slowly, that $2 could go to zero.
So you have to go into this knowing: this is a highly speculative: Big upside, clearly defined risk.
Why This Matters
I’m not in this to chase hype or trade news flow. This setup has nothing to do with macro predictions or where I think Bitcoin is going.
It’s about math.
MSTR got stretched. Bitcoin bounced here before. The chart tells me it’s in the zone — and that makes it worth a look.
Good luck and be careful.
Talk soon,
JD
The Rational Trader
P.S. Got 20 minutes to trade in the morning? Geof Smith is sharing a simple way you can target $500 from a $2500 stake — right at the opening bell. You have to check this out.
