Shares of MicroStrategy Incorporated (NASDAQ:MSTR) are trading fractionally higher Tuesday. However, there is a good chance they could break support and move lower.

A classic descending triangle pattern has formed on the chart. This is a bearish pattern that suggests the recent downtrend may continue. This is why our team of technical analysts has made it our "Stock of the Day."

To understand technical analysis, traders need to realize that chart patterns are not like reading tea leaves or astrology. They are graphical illustrations of price action that is created due to investor and trader psychology.

The descending triangle pattern shows that as time goes by, buyers are patient. But over the same period, sellers became increasingly aggressive. This combination of aggressive sellers and complacent buyers sets the stage for the stock to move lower.

As you can see on the chart, support for MicroStrategy has been around $360.00. A large group of buyers were willing to be patient and stay at that level as time went by, waiting for the sellers to come to them.

Read Also: Microsoft, Amazon Investors Eye Bitcoin Investments Amid MicroStrategy's Success

This is illustrated by the horizontal support line on the chart.

But over the same period, the sellers became increasingly aggressive. This means they were willing to accept successively lower prices. This is why the resistance line on the chart is descending.

Markets don't go in straight lines. The trends have peaks and valleys. When a peak is lower than the one that formed before it, traders say it is a "lower high." Sellers were willing to enter the market at lower prices.

The descending resistance line in the pattern illustrates this price action.

Technical analysis has a bad reputation on Wall Street. This isn't surprising. Many analysts try to identify patterns on charts without understanding the price action and psychology that causes these patterns to form. This results in bad calls.

Technical analysis should be viewed through the prism of psychology. The descending triangle is an illustration of a market with aggressive sellers and complacent buyers. These are bearish dynamics.

There is a good chance MicroStrategy breaks the support and heads lower.

• Peter Schiff Advises Biden To Do One 'Good Thing' Before His Term Ends: 'Sell All The Bitcoin' Held By The US

Photo: Shutterstock