The MSTR stock price has crashed to a crucial support level, and technicals point to more downside as it continues to decouple from Bitcoin. Strategy was trading at $365 on Monday, down by 20% from its highest point this year.
MSTR Stock Price Analysis
The daily timeframe shows that the Strategy share price has moved into a bear market even as Bitcoin hovers near its all-time high. Worse, technicals suggest that it has more downside in the coming weeks.
Strategy stock now sits at a crucial support level at $360, its lowest point in May, June, and July. This support coincides with the neckline of the head-and-shoulders pattern, a common bearish reversal pattern.
This pattern has a depth of about 21%. Measuring the same distance from the neckline gives it a target level of $283. The initial MSTR stock target is $335, which is the 200-day moving average, where it has constantly bounce above since October 2023.
The bearish Strategy share price forecast will become invalid if it rises above the right shoulder at $413.
MSTR stock price chart | Source: TradingView
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Why Strategy Has Decoupled From Bitcoin
A closer look shows that Bitcoin has decoupled from Bitcoin in the past few months. Historically, the two assets used to move in the same direction, often with a correlation coefficient of close to 1. This year, however, this coefficient has dropped to about 0.77.
There are a few reasons why the two assets have decoupled. First, short-sellers, including Jim Chanos, have circled around the company, boosting its short interest to 10%. More short sellers normally point to strong selling pressure among investors.
Second, there are significant concerns about dilution as the company continues to sell shares to buy Bitcoin. Its outstanding shares have jumped to over 260 million from less than 100 million in 2020. Michael Saylor criticizes these fears, pointing to its strong Bitcoin yield.
Third, MSTR stock has crashed because of the rising fears that it is a highly overvalued at a time when the number of Bitcoin treasury companies are rising and recently crossed 100.
Strategy now holds 628,946 coins worth $74 billion and a market capitalization of over $104 billion. Assuming that its technology company is worth $1 billion, it means that its Bitcoin holdings are valued at over $31 billion. As a result, chances are that the MSTR stock is falling as investors narrow the premium.
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