Summary The previous 'Sell' rating on Defiance Daily Target 2X Long MSTR ETF correctly anticipated the fund's massive capital destruction, including a necessary 1-for-10 reverse stock split in March 2026 to avoid delisting.

MicroStrategy has plummeted 42% this year—mostly in the past month—driving its RSI down to a deeply exhausted 24.8 and signaling a highly probable near-term relief rally.

Because MSTX is already down 80% year-to-date, the maximum remaining upside for short sellers is mathematically capped, while the risk of getting caught in a violent counter-trend bounce is high.

The position is being upgraded from Sell to Neutral/Hold, advising short sellers to lock in their 64%–80% profits now and wait for technicals to reset before re-entering a short position.

Thesis At the start of the year, we wrote an article regarding the Defiance Daily Target 2X Long MSTR ETF ( MSTX ) , an ETF that represents a 2x daily take on Strategy ( MSTR ).

We rated the name 'Sell,' highlighting our technical take on Bitcoin (the main driver for the MSTR price), and also showed investors that the name needed to do a reverse split in order to remain listed.

The fund management read our article and proceeded to shortly do a reverse split in March 2026: Defiance Daily Target 2X Long MSTR ETF ((MSTX)) has announced a 1-for-10 reverse stock split.

As a result of the reverse stock split, each MSTX Share will be converted into the right to receive 0.1 (New) Defiance Daily Target 2X Long MSTR ETF Shares.

The reverse stock split will become effective before the market open on March 19, 2026.

This was a large 1-for-10 reverse split.

The ETF is down significantly since our rating, with MSTR experiencing a massive downdraft in the past few days: Prior Rating (Seeking Alpha) Short sellers for MSTX would have made over 64% by taking action when the article came out (not counting borrowing costs here).

In today's piece, we are going to review the latest bitcoin developments, our technical view on the market, and the impact on MSTX.

Oversold conditions In the past few days, both Bitcoin and MSTR have been under significant pressure: Data by YCharts Bitcoin is down -33% this year (using the iShares ETF as a proxy here), while MSTR is down -42% in 2026.

Do note that the vast majority of the MSTR losses came in the past month.

This is highly unusual and is marked by a very oversold technical picture: Technicals (Seeking Alpha) The stock is touching the lower part of the Bollinger Band and has a very oversold RSI of 24.8: The Relative Strength Index ((RSI)), developed by J.

Welles Wilder, is a momentum oscillator that measures the speed and change of price movements.

The RSI oscillates between zero and 100.

Traditionally the RSI is considered overbought when above 70 and oversold when below 30.

While MSTR is still in a downtrend, nothing goes down in a straight line like a hammer in a lake.

For example, in 2026, MSTR is in a downtrend, but most of the down move has occurred in the past month.

Technical oversold conditions usually resolve themselves via a slight bounce to the middle of the Bollinger Band and time spent at higher levels than today's.

Those factors would 'mend' the RSI and bring it to a more neutral position around 50.

We are of the opinion that we are due for such a bounce after a vicious rout in the shares.

Investors can go to the Seeking Alpha ' Momentum ' tab for MSTR and see the historic performance for the stock every time it hit such a low RSI level.

Each and every time, the stock either rebounded or remained at a similar price point for a number of weeks.

Technicals do matter, and even in a downturn, RSI cannot stay oversold too long.

Impact to MSTX Since MSTX represents a 2x take on MSTR daily swings, the ETF is also down significantly this year: Data by YCharts MSTX is down an astounding -80% this year, basically almost wiping out the entire capital of the holders.

Given our view on a slight rebound in price for MSTR, MSTX will get a benefit, albeit in a larger down-trending market.

Depending on how large the bottom bounce is for MSTR, we could see a +10% to +20% rebound here for MSTX.

While we do not like to trade rebounds in a down-trending market, we have to respect the fact that conditions are deeply oversold technically for both MSTR and MSTX; thus, one has to be mindful of the technical picture and rebound.

Also to note, MSTX is a daily 2x return; thus, its year-to-date figure is not exactly 2x the MSTR return due to beta slippage.

More on risks associated with this and similar leveraged ETFs can be found here .

One has to be mindful of targets and exits when it comes to leveraged ETFs because of the high volatility.

If one shorted this name at the beginning of the year, one would have an 80% gain already.

This is a great figure to have and start taking profits.

You cannot make more than 100% by shorting an ETF, and the bear market rallies can be very strong.

We are of the opinion that we are very oversold here, and we will see a dead cat rebound; thus, short sellers should take profit here and wait for the rebound to re-enter the short trade.

Conclusion MSTX is a daily 2x MSTR ETF that got hit hard in 2026.

The name is down 80% this year, and had to do a reverse stock split in order to remain compliant with the exchange rules.

Short sellers who shorted the name in the beginning of the year would do well to take profits here since we are seeing oversold technical levels.

While the overall trend for bitcoin is still down, bear market rebounds can be very vicious, especially after hitting oversold conditions in such a short period of time.

We are moving to neutral/hold on MSTX and would wait for a significant rebound and mending of technicals before considering shorting the name again.