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The MSTR stock price continued its free fall today, October 30, reaching its lowest level since April of this year. It has now dropped by over 40% from its highest level this year, erasing billions of dollars in value as the market capitalization fell from $128 billion to $78 billion.
MSTR Stock Price Technical Analysis Suggests the Freefall May Continue
The daily timeframe chart shows that the MicroStrategy stock price has been in a strong downward trend in the past few months as it moved from a high of $457 in July to $273 today.
This chart shows that the stock has more downside potential in the near term, as it has moved below the key support level at $277, where it formed a small double-bottom pattern.
It has also moved below the Weak, stop, and reversal point of the Murrey Math Lines tool. This is a sign that bears have prevailed and are now eyeing the ultimate support level at $250.
Strategy stock price formed a death cross pattern on October 11 as the 50-day and 200-day Exponential Moving Averages (EMA) crossed each other. This pattern often leads to more downside as it confirms that the short-term price action has prevailed.
The Average Directional Index (ADX) has jumped to 21, its highest level since September, and is pointing upwards, a sign that the downward momentum is strengthening. It also remains below the Supetrend and Ichimoku cloud indicators.
Therefore, the stock is likely to continue falling as sellers target the key support level at $232, where it formed a double-bottom pattern in February and March of this year.
S&P Global Identified Key MicroStrategy Risks
The MSTR stock price has tumbled after S&P Global, the biggest credit rating company, delivered its first rating of the company.
It assigned it a B- credit rating, meaning that it has now moved to junk status, which may raise its cost of capital.
The agency identified several risks that are facing the company. For example, it believes that the company’s low US dollar liquidity is a weakness due to its preferred shares strategy and convertible debt.
It also noted that there was a cybersecurity risk as its business is most likely related to Bitcoin, meaning that private keys can be lost or stolen.
Falling Bitcoin Price and NAV Multiple is a Major Risk
The other major risk facing the MSTR stock price is that the Bitcoin price has crashed from the year-to-date high of $124,688 to $110,000. This Bitcoin crash has reduced its Bitcoin balances to about $69 billion, down from a record high of over $80 billion.
On the positive side, the Bitcoin price has consistently bounced back whenever it entered a correction or bear market. Such a rebound would benefit the company by boosting the value of its assets.
However, there is a risk that the coin is on the cusp of a prolonged bear market as it has formed a rising wedge pattern on the weekly chart.
Most importantly, the company faces a fundraising and dilution risk as it uses its stock to raise cash, which it uses to buy Bitcoin
The challenge, however, is that the premium MicroStrategy enjoyed a few months ago has largely disappeared. It has a basic net asset value (NAV) of 1.131, much lower than the November high of 3.3.
It has an enterprise value of $94 billion, resulting in a market-adjusted net asset value (mNAV) of 1.31. Therefore, the multiples will drop below the important support at 1. Recently, Metaplanet did that, and its stock has since crashed.
Summary
MicroStrategy stock price has been in a strong downtrend this year as the company evolved into a fallen angel. It has weak technicals, including a death cross, and fundamentals, pointing to more downside in the near term.
