Key Takeaways
- Shares of Strategy, formerly known as MicroStrategy and one of the world’s largest holders of bitcoin, have fallen sharply this month as the digital currency has slumped.
- The stock broke down below a three-month descending triangle this week on increasing volume, potentially setting the stage for further falls.
- Investors should watch crucial support levels on Strategy’s chart around $180, $115, and $69, while also monitoring key resistance areas near $315 and $543.
Shares of Strategy (MSTR), formerly known as MicroStrategy and one of the world’s largest holders of bitcoin, has tumbled this week as the digital currency continues to slump.
The company, which has built a stash of nearly 500,000 bitcoins, has seen its stock come under selling pressure amid mounting investor concerns about the health of the economy and uncertainty about the potential impact of trade tariffs. The possibility of rising inflation is a particular concern as that would make it harder for the Federal Reserve to cut interest rates, which isn’t great for investors in risky assets such as crypto or stocks.
Strategy said earlier this week that it had purchased another large amount of bitcoin, valued at roughly $2 billion, a development potentially weighing on the stock as the cryptocurrency’s price has retreated to its lowest level in three months.
The company’s shares were down 30% over the past month through Thursday’s close but had nearly tripled over the past 12 months as investors have turned to the stock as a way to take a leveraged bitcoin bet. The stock was up 6% at $255 in recent trading Friday morning, after falling sharply in the premarket session as bitcoin fell below $80,000.
Below, we break down the technicals on Strategy’s chart and identify crucial price levels worth watching out for.
Descending Triangle Breakdown
Strategy shares traded within a three month descending triangle before staging a decisive breakdown below the pattern this week on increasing volume, potentially setting the stage for further falls.
Indeed, Thursday’s trading session saw selling intensify, confirmed by the relative strength index (RSI) falling below the 30 threshold into oversold territory to register its lowest reading since December 2022.
Let’s identify three crucial support levels on Strategy’s chart where the shares could encounter support if the bearish momentum continues, but also point out key resistance areas worth monitoring during possible recovery efforts.
Crucial Support Levels to Watch
The bulls’ failure to defend the closely watched 200-day moving average could trigger a fall to key support around $180. The shares may attract buying interest in this area near a trendline that connects multiple peaks that formed on the chart between March and September last year.
A close below this level could see the shares revisit $115, a location on the chart that may provide support near a range of prominent lows that developed last year in April, May, August, and September.
Further selling opens the door for a steeper correction in the stock down to around $69. Bargain hunters could look for entry points in this region near the prominent December 2023 swing high, which closely aligns with the low of a pullback in February last year.
Key Resistance Areas to Monitor
During recovery efforts in the stock, investors should initially monitor the $315 area. A retest of this location could present selling pressure near the descending triangle’s bottom trendline, which may flip from prior support into future resistance.
Finally, a move back above the descending triangle could see Strategy shares rally to around $543, an area they would likely gain significant attention near the stock’s all-time high set in late November last year.
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