Microsoft (MSFT-Q) (Wednesday’s close US$363.20) traded below a falling trend line (dotted line) and below the falling 40-week Moving Average (40wMA) for about one year as it declined from US$349.67 to US$213.43 (A-B). The stock rallied above these indicators earlier this year to signal the reversal of the negative trend (C). Microsoft reached a recent high of US$340.81 in July and became overbought as it was quite far above the 40wMA (D). The stock has since pulled back toward its average and found good support near US$309-310 (shaded area). A sustained rise above ±US$360 would suggest the stock is ready to resume the uptrend.
Behaviour indicators including the rising 40wMA and the rising trend line (solid line) confirm the bullish status. There is good support near $±US$325; only a sustained decline below the 40wMA (currently near US$309-310) would be negative.
A rise above ±US$360 would signal Point & Figure targets of US$400 and US$450. A breakout would support additional targets.
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Monica Rizk is the senior technical analyst of the Phases & Cycles publication (www.capitalightresearch.com). Chart source: www.decisionplus.com
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