The Key Take-Aways
- MicroStrategy shares rose in premarket trading Monday after Bitcoin set a new record high and the company's stock was added to the Nasdaq 100 index.
- This stock is consolidating in a downward triangle. A chart pattern which can often indicate a break out or breakdown.
- Bars pattern, which extracts and positions the trend that was higher before the triangle, from its upper trendline. It forecasts an upward target of approximately $800.
- Investors should watch important support levels on MicroStrategy's chart near $268, $227, and $180.
MicroStrategy’s (MSTR), shares rose Monday in premarket trade after Bitcoin (BTCUSD), set a record high of $106,000. The company stock was also included in the Nasdaq 100 Index.
Bitcoin continues to reach new heights, and the Bitcoin proxy has experienced a six-fold increase in its share price since January.
The mood may be boosted after Nasdaq, late Friday night, announced that Invesco’s QQQ Trust will automatically buy the stock. This is because large exchange-traded fund (ETF) tracking indexes such as Invesco will do this.
Recent pre-market trading saw the stock rise by nearly 4%, to $424.
We will use the technical analysis below to determine important price levels for investors.
The Descending Triangle takes Shape
MicroStrategy stocks have consolidated in a descending triangular chart pattern, which often signifies a movement in the direction of an upcoming breakout or break-down.
Meanwhile, relative strength (RSI) has retreated beneath overbought level throughout the stock’s recent consolidation phase. However, it has carved out a reverse head-and-shoulders pattern that could point to a regional bottom.
MicroStrategy chart will help you identify important levels for support and a target to look out for in case of possible break-out.
Breakout Targets to Watch
The tool for analyzing past trends can help investors forecast future price changes.
In order to apply this tool on MicroStrategy’s chart, you need to extract the upward trend that occurred before the descending triangular pattern and move it away from the upper trendline. This will forecast that the stock may continue its uptrend. It suggests a price target around $800. That’s nearly double the closing Friday price of $408.67. An area in which investors can take profits.
Support levels for Monitors – Breakdown
Investors should first monitor $268 if the triangle breaks down. This position, just below the MA of the last 50 days, could find some support at the high point in October.
Investors may look for entry points in the region between the peak of mid-October and the trough at the beginning of November.
The inability of MicroStrategy’s bulls to hold this level opens the way for a new test at $180. Investors may want to look at buying opportunities near the 200-day MA as well as a line of multi-months that links a variety of price actions between March-October.
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The author of this article does not currently own any securities listed above.
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