The price of MSTR has dropped nearly 22% over the past month, moving in line with Bitcoin's decline of about 23% during the same period. As Bitcoin's price has weakened further, pressure has increased on MicroStrategy's large BTC treasury, with recent estimates indicating that there are now unrealized losses or 'paper' losses exceeding 3.5 billion USD from this company's Bitcoin holdings.
This downturn has led several Wall Street firms to lower their price targets, with one major analyst slashing the target by 60%. However, data from technical charts and circulating capital suggests that MicroStrategy's long-term recovery trend has not been entirely broken. So, what signals is the chart currently showing? Let's take a look.
An ascending wedge and increasing CMF indicate that large capital is still buying in.
Despite losses recently, MicroStrategy's daily chart remains within the structure of a descending wedge, which typically indicates that selling pressure is weakening and is likely to rebound if it can break above resistance. Additionally, the upper trend line is close by and is nearing the 20-day exponential moving average as well.
Historically, this chart pattern has performed well for MSTR, as in early October and mid-January, the stock had bounced back by 10% to 15% after regaining its position above the 20-day exponential moving average or EMA. The EMA is a trend line that responds relatively quickly to price changes.
As mentioned, the 20-day EMA is now near the upper edge of the descending wedge, which means that if buying pressure returns, the chart could break above resistance quickly.
Another significant signal is the Chaikin Money Flow or CMF, which is an indicator of whether large investors are putting money into or taking it out of assets, relying on price data and trading volume. Since January 12, the CMF has trended upward, even though the stock price has moved down.
This creates a bullish divergence signal because even though the price has fallen, large investment flows have increased.
This situation aligns with a recent report revealing that MicroStrategy's Bitcoin position has unrealized losses exceeding 3.5 billion USD, but large investors have not rushed to sell off; rather, new capital has been quietly flowing in.
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Looking at the descending wedge pattern along with the increasing CMF, it can be seen that institutional investors are still allocating to wait for a recovery rather than selling their shares off.
Analysts' targets have decreased as the MFI indicates weak retail buying pressure.
Although the large investment group supports Michael Saylor's strategy, the overall sentiment on Wall Street has clearly weakened.
The financial services company Canaccord Genuity has lowered its price target for MicroStrategy's stock from 474 USD to 185 USD, a decrease of about 60%. This reduction is likely related to the drop in Bitcoin prices, as well as the increased risks from the company's leveraged treasury management strategy.
Meanwhile, other companies still evaluate this stock as suitable for purchase, resulting in the average price target still being significantly higher than the current price. This thus creates a clearly different expectation.
Looking at the Money Flow Index or MFI, we can understand the reasons for this divergence more clearly.
The MFI uses price and trading volume to measure pressure from both the buy and sell sides, and is often used to see if small speculators are actively buying during price dips or remaining cautious.
Between January 30 and February 4, MicroStrategy's stock price declined, and the MFI also decreased accordingly, with no clear signs of bullish momentum. This means that retail investors are not actively buying in; in simple terms, large investors are accumulating shares while retail traders remain hesitant.
This contradiction is a key issue; usually, a sustainable recovery requires support from both institutions and retail investors, but now only one side is clearly visible.
This hesitation explains why some analysts have lowered their price targets, even though many others remain optimistic.
The important MSTR price level to watch now.
The final piece of this puzzle comes from the price structure and various support levels.
For MicroStrategy to regain technical strength, it must reclaim the 140 USD zone first, as this area serves as both a psychological resistance and a confirmation of the trend. Therefore, if the daily closing price is clearly above 140 USD, the price may return close to the breakout zone of the wedge and near the 20-day EMA line.
If the breakout occurs, the next important target will be near 189 USD, as this level is significant for three reasons:
Firstly, this level coincides with the main Fibonacci retracement zone, which often serves as both a significant resistance and support level where prices tend to react. Secondly, it matches Canaccord's new target at 185 USD, indicating that analysts are also keeping an eye on this same technical zone.
Thirdly, this level is near the midpoint of the recent accumulation range, thus becoming a natural target for the price to head towards if it breaks 189 USD. The trend from the formation of the falling wedge would also point to 225 to 230 USD, which represents an upside of about 63% from the current level, and this zone also aligns with the lowest price target estimated by analysts.
However, if MicroStrategy cannot reclaim 140 USD, the entire bullish structure will weaken immediately, increasing the downside risk to 109 USD, especially if Bitcoin continues to decline.