Technical Analysis – Microsoft consolidates at all-time highs; sellers grab the reins to rally down


Anthony Charalambous, XM Investment Research Desk

Microsoft stock has been in a seven-month ascending channel since December but last week ran into a wall near the previous all-time high of 138.34 set two weeks ago. Sellers have picked themselves up and today started to push down.

Although the bullish bias from the 21-, 50- and 100-day simple moving averages (SMAs) is apparent, the MACD seems to suggest a negative divergence causing a fall in momentum as the MACD and trigger line flatten out in the positive area. The RSI is in agreement and has hit the down trendline near the over-bought level and turned lower. The ADX still supports the existing strong trend.

A shift to the downside seems to be unfolding in the very-short term, and if sellers rally down, the 21-SMA would be the first test before the previous swing low of 132.61 on June 25. For a movement further south, the 50-SMA coupled with support of 130.50 would need to be broken initially, before the 61.8% Fibonacci of the up leg of 118.96 to 138.34, of 126.37, and the 100-SMA come into play. Ultimately, for a medium-term bearish bias the low of 118.96 would need to be fractured.

The long-term bullish bias could move the price up to the ascending channel’s upper boundary, if the 21-SMA holds.

Overall, Microsoft long-term bullish bias may see a shift to bearish in the very short- and medium-term if the downward move has potency.