Microsoft Corporation (NASDAQ:MSFT), while now fairly flat in 2016 thanks to the V-shaped reversal earlier this year, continues to trade in one of the most constructive-looking patterns among large-cap stocks out there. Sure, Microsoft stock won’t be immune to any market gyrations in what I think is a bear cycle for stocks overall.
Still, MSFT’s relative strength and general technical picture still make it a buy on dips and for quicker traders a buy on breakouts.
Microsoft is expected to report its next quarterly earnings on April 21, so about three weeks for today. For investors, that’s likely the next big catalyst on the calendar.
In difficult stock market environments such as the one we are in today, it pays to look for stocks both exhibiting relative strength and remaining in their primary multiyear uptrends.
As we will see on the below charts, MSFT stock fits this description.
Microsoft Stock Charts
To understand the path of least resistance for MSFT in the intermediate-term, we first need some perspective from the long-term.
On the weekly chart, which stretches all the way back to the late 1990s, we can see that Microsoft stock recorded its all-time high near the $60 area in late 1999. The stock then began to deteriorate sharply as the air came out of the Internet bubble.
MSFT has been in a decade-and-a-half of relative pain ever since.
In 2013, Microsoft stock finally managed to break out of a long-term bottoming phase as it cracked above the $37 area, which led to an acceleration in the upward trend in 2014. In 2015, the stock consolidated for a good part of the year, but then saw a next upward leg take hold in October.
Despite some weakness in MSFT shares in January due to the broader market selloff, Microsoft remains trading in its primary up-trend and is using consolidation phases to push higher, which ultimately should lead to the stock moving back toward its all-time highs near $60.
Moving over to the daily chart, we see that last October, Microsoft stock broke past a key intermediate term area of resistance (blue box) and managed to keep the upside momentum into year-end 2015. The 15% correction in January and February simply mean-reverted MSFT back to this former area of horizontal resistance, which at the time also intersected with the red 20-day simple moving average.
After a couple of weeks of consolidation, MSFT stock on Wednesday attempted to push past its early February highs, and marginally succeeded in doing so.
Active investors have now have two options as it relates to Microsoft stock:
- Buy the stock on pullbacks into the low $50s, and/or …
- Use good breakout attempts such as the one on Wednesday to play the stock higher in nearer time-frames.
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