A market analyst, Sir Chartist, predicts a wild ride for Strategy’s stock (MSTR). He believes it’s headed for a significant drop before a substantial rebound.
The Predicted Dip and Rise
Sir Chartist forecasts the stock price could plummet to as low as $350. However, he anticipates a subsequent surge back up to $700 once selling pressure eases. He expects this two-stage movement to happen relatively soon.
Technical Signals Pointing to a Drop
Sir Chartist highlights several technical indicators supporting his bearish prediction:
- Moving Averages: MSTR has fallen below both its 9-day exponential moving average and its 20-day simple moving average. This convergence suggests weakening short-term momentum.
- Shifting Trend: The consistent upward trend seen in April has reversed, with increased selling pressure.
- Volume: High trading volume on down days indicates sellers are in control. However, a sharp drop followed by reduced selling volume and larger green candles (indicating buying) could signal a bottom. He’ll only turn bullish when buying volume clearly surpasses selling volume.
The Impact of Bitcoin and Stock Dilution
Strategy plans to raise $2.1 billion through a stock sale to purchase more Bitcoin. While increased Bitcoin holdings could eventually boost the stock price, the influx of new shares could initially depress the price due to dilution. Sir Chartist believes this dilution is a contributing factor to the expected initial drop.
Past Performance and Potential for a Rally
Sir Chartist points to a previous breakout from a sideways trading pattern that resulted in over 100% gains with minimal pullback. He believes this past pattern suggests a similar rally is possible after the anticipated price drop. He uses the phrase “history doesn’t repeat, but it often rhymes” to describe his reasoning.
Other Analyst’s Opinion
Crypto analyst Ali Martinez agrees, identifying a TD Sequential sell signal on MSTR’s weekly chart, which often precedes a price decline. Even a recent large Bitcoin purchase by Strategy wasn’t enough to override the bearish technical signals.
The Bottom Line
In summary, Sir Chartist predicts a short-term price drop to around $350 for MSTR, followed by a significant rally to $700. His analysis considers technical indicators, volume trends, past price action, and the impact of Strategy’s Bitcoin buying plans.
