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Key Insights:
- The MSTR stock price could be at risk of more downside this year.
- Bitcoin price has plunged and formed a bearish flag chart pattern.
- Strategy is now selling its shares below the mNAV of 2.5.
MSTR stock price continues to struggle this year, a trend that may continue after it missed the S&P 500 inclusion and as Bitcoin forms a risky pattern. Strategy stock dropped to a low of $318, its lowest level since April. It is also trading 30% below the highest level this year and 40% below its 2024 highs.
Bitcoin Price Risky Pattern Could Sink MSTR Stock
The close correlation that existed between Bitcoin and MicroStrategy has ended this year. MSTR stock has moved into a bear market, while Bitcoin is in a correction after falling by about 10% from its highest level this year.
However, there is a risk that the Strategy share price will plunge further if the Bitcoin price continues falling. Technical analysis on the daily and weekly charts shows that the coin has more downside to go in the coming weeks.
The daily timeframe chart shows that Bitcoin price formed a double-top pattern at $123,250 and a neckline at $112,000. A double-top is one of the most common bearish continuation signs in technical analysis.
BTC has recently retested the neckline, confirming the break-and-retest chart pattern. Most importantly, it has formed a bearish flag pattern, which is shown in black in the chart below.
This pattern comprises a vertical line and an ascending channel. In this case, the channel resembles a rising wedge pattern, which is also a bullish signal.
Therefore, the most likely outlook is for the BTC price to plunge in the coming days. It could also move below $100,000 for the first time since June this year.
MSTR Stock Price Technicals Point Further Downside
Worse, the Strategy stock price has more downside in the coming weeks as it has formed weak technicals.
The daily timeframe chart shows that the stock continues to make a series of lower lows and lower highs. This is a sign that bulls are staying away as its freefall continues.
There are signs that the downtrend is gaining momentum as the Average Directional Index (ADX) has moved to 25. An ADX figure of 20 and above is a sign that a trend is strengthening.
Most importantly, the stock will likely form the highly bearish death cross pattern as the 50-day and 200-day Weighted Moving Averages (WMA) narrow. Such a crossover will likely lead to more downside, with the target price being at $233.
Dilution Concerns and S&P 500 Exclusion
One of the main reasons why the Strategy stock price has crashed this week is that it missed the highly coveted S&P 500 Index inclusion. Instead, Dow decided to add Robinhood to the index, pushing it to a record high.
The other main reason why the MSTR stock price is crashing is that there are signs that investors will continue being diluted as the company sells more shares to buy more Bitcoin.
Strategy’s outstanding shares have jumped to 261 million, up from 72 million in 2021. This means that investors who held the shares at that time now hold a smaller share.
These investors have, however, benefited as the stock has soared in this period. Recently, however, there have been signs that the company is struggling, with Michael Saylor changing his approach to equity issuance.
In a recent statement, he said that the company will consider selling shares when the mNAV is below 2.5, a figure it has remained at during the past few months.
The company has continued doing this as it sold just $16.8 million of preferred shares last week, 8% of the total raised. 92% of its issuance was in dilutive equity selling.
The Bitcoin treasury industry has also become highly competitive this year, with over 100 companies holding over 1 million coins. This competition has lowered the premium that investors had with MSTR when it was the only game in town.
Disclaimer
This article is for informational purposes only and provides no financial, investment, or other advice. The author or any people mentioned in this article are not responsible for any financial loss that may occur from investing in or trading. Please do your research before making any financial decisions.
