Key Takeaways
- •MSTR's rare reversal pattern, the "Abandoned Baby," suggests rising odds of a sharp rebound.
- •Bitcoin volatility remains a key downside risk for the stock.
Understanding the "Abandoned Baby" Pattern
The "Abandoned Baby" is a rare and powerful bullish reversal pattern in technical analysis that forms after a prolonged downtrend. It is characterized by three distinct candles:
- •A long bearish candle, indicating strong selling pressure.
- •A small indecision candle that gaps lower than the previous day's low, suggesting a potential exhaustion of sellers.
- •A strong bullish candle that gaps higher than the previous day's high, confirming the shift in momentum and leaving the middle indecision candle "abandoned."
This pattern is considered "super rare" and one of the most reliable reversal signals, often referred to as the market's version of a unicorn due to its infrequency and effectiveness.
Potential Upside for MSTR Prices
MicroStrategy (MSTR) stock recently displayed the "Abandoned Baby" pattern after experiencing a significant multimonth downtrend. During this period, its price plunged by approximately 66% from its 2025 peak, reaching a low of $155.61 on Monday.
The stock has since shown signs of recovery, gaining around 22.50% from its Monday low. This rebound has been partially supported by a notable recovery in the Bitcoin (BTC) market, driven by increasing expectations of a Federal Reserve rate cut in December.
The current macroeconomic environment appears to be strengthening the bullish outlook for MSTR. Traders are observing multiple technical confirmations that support this view.
On Wednesday, analyst Lark Davis pointed out the formation of a hammer candle near the recent lows, alongside an oversold Relative Strength Index (RSI). Both of these indicators typically signal seller exhaustion and a potential shift in risk-reward dynamics favoring buyers.
Options trader Brando has predicted an "aggressive move back above 200," with potential targets reaching $280, which represents a 50% increase from current prices, provided that the prevailing macro and technical conditions continue.
"MicroStrategy has finally reached a level where the risk-to-reward is starting to lean heavily to the upside. Lots of bearish sentiment surrounding this name lately, which could provide an opportunity when many are scared."
Further bolstering the optimistic outlook, Dan Dolev, an analyst at Mizuho Securities, has projected that MSTR stock could potentially reach $484.
Downside Risks
Despite the positive technical signals, downside risks remain for MSTR. A resurgence in Bitcoin volatility, a cooling of spot ETF inflows, or a fading of expectations for a December rate cut could negatively impact MSTR, potentially more severely than the broader market.