MSTR Stock Price Outlook as Short Interest Plunges

MSTR stock price crashed this year and has been at its lowest since April. It has plunged by almost 30% from its highest level in July. This article explores what to expect now that the short interest has plunged to the lowest since 2020.

MSTR Stock Short Interest is Falling

The percentage of MSTR stock held by short sellers is falling. According to Koyfin, the company has a short interest of 8.12%, its lowest level since December 2020 when it started its Bitcoin accumulation strategy.

The short interest has been declining after peaking at 32% in 2022. Falling short interest is good because it signals that investors are closing their bearish bets on the stock. Some of these short-sellers sometimes turn bullish and buy the stock.

MSTR’s short interest has fallen in the past few years as the stock surges. While it is still in a bear market, it is still one of the best-performing companies on Wall Street after soaring by over 2,100% from its lowest level in 2020.

Still, some prominent investors are short the company as they expect the stock to continue falling. One of them is Jim Chanos, who has opened a pair trade of shorting MSTR and being long Bitcoin.

The bearish case for MSTR stock is that the company is highly overvalued and that at some point, its premium to its Bitcoin holdings will narrow as it has done in the past few months.

MicroStrategy has an enterprise value of about $109 billion, while its Bitcoin holdings are worth about $71 billion, giving a difference of over $38 billion. This $38 billion gap is hard to account for as its technology business has deteriorated.

MicroStrategy Stock Price Analysis Points to More Downside

Technical analysis points to further MSTR stock price analysis. It has plunged below the year-to-date high of $457 to the current $330. By doing this, it has dropped below $360, the neckline of the double-top pattern.

The downtrend is accelerating as the Average Directional Index (ADX) has risen to 25. ADX is one of the most common trend-measuring indicators, with a figure of 20 and above signaling that the trend is strengthening.

Additionally, the Awesome Oscillator has remained below the zero line. The stock is also nearing the death cross as the spread between the 50-day and 200-day moving averages narrows.

Therefore, the most likely scenario is where the MSTR stock price continues falling as sellers target the important support at $233, about 30% below the current level. This target is at its lowest level in March and April.

Potential Catalysts that May Boost Strategy Stock

While the MSTR stock is bearish, a few catalysts may trigger its comeback. The most important one is the performance of Bitcoin, which is its primary business and has remained in a tight range in the past few weeks.

Bitcoin could stage a strong bullish breakout in the coming weeks if the Federal Reserve starts cutting interest rates. Most economists expect a 25 basis points cut this month as the bank remains concerned about the labor market.

Another potential catalyst is a short squeeze that has affected several companies, including GoPro and Opendoor. These short squeezes often affect companies with high short interest, including MSTR.

The stock could also jump as investors buy the dip now that its net asset value has slumped from 3.1 in November to 1.3 today. Also, it could benefit if it becomes the next member of the S&P 500 Index.

Summary

Strategy has slowly become a major player in the US by accumulating Bitcoin in the last five years. It stock has plunged in the past few weeks, and technicals point to more downside. However, some catalysts, like a Federal Reserve cut, S&P 500 Index inclusion, and falling short-term interest rates, may boost its performance.