Why MicroStrategy could see stock price plummet

Core Viewpoint - MicroStrategy Inc (NASDAQ: MSTR) has shown significant stock performance in 2024, with a year-to-date return of 196.01% as of mid-October, despite recent volatility and bearish signals in the market [1][4]. Stock Performance - At the beginning of 2024, MSTR's stock price was $68.52, and it has risen to $202.44, marking a 50% increase over the last 30 days [1]. - Following the announcement on October 11 to become 'the world's first Bitcoin bank', the stock price surged from $196.40 to $212 [1]. - However, on October 14, the stock experienced a sudden drop of 7.58%, raising concerns among technical analysts about a potential significant correction [1]. Technical Analysis - Technical analyst Alan Santana noted that while MSTR reached an all-time high on October 14, a large red candle indicated a pullback from that price point [2]. - There are three bearish divergences currently observed, suggesting caution in the stock's future performance [2]. - The current price surge is occurring with only half the trading volume compared to previous surges, indicating a bearish divergence [3]. Bitcoin Correlation - MSTR's stock price is closely tied to Bitcoin, with the company holding 252,220 BTC valued at approximately $40.86 billion, which constitutes 40.40% of MSTR's market cap [4]. - The company has consistently purchased Bitcoin, except for a notable pause in September, reinforcing the link between MSTR's stock performance and Bitcoin's value [4]. - While a drop in Bitcoin's price would likely affect MSTR's stock, the company's substantial reserves and recent institutional adoption of Bitcoin ETFs may provide some protection against severe declines [4].