Microsoft Corporation (MSFT) Stock Is a Breakout Candidate

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On Tuesday, the Nasdaq Composite pushed to a fresh all-time high as big name tech stocks such as Microsoft Corporation (NASDAQ:MSFT) continued to receive a bid. MSFT stock itself briefly pushed to a new all-time high as well. And while it closed off those highs, Microsoft looks constructive, likely into year’s end.

Microsoft Corporation (MSFT) Stock Is a Breakout CandidateFor a stock like Microsoft, it’s all about keeping perspective.

As I have discussed for the past few weeks, the name of the game right now is rotation. While financials, industrials and transports showed relative strength over the past few months, they did not break out and show absolute strength until after Election Day. Since then, more sectors, industries and individual stocks have rotated higher as investors sought out less overbought pockets to allocate money to.

Large-cap tech names such as Microsoft stock showed great absolute and relative strength this year starting in the summer months. This strength started to wane a couple weeks before the election and faded a few days past the results.

But over the past 10 trading days, these stocks have once again showed signs of life. And MSFT itself even showed absolute leadership.

Let’s look at the charts.

MSFT Stock Charts

The multiyear weekly chart of Microsoft stock shows that while the ascent has been steep, it also has been orderly and largely taken place in a well-defined up-sloping range.

Microsoft MSFT stock chart weekly view
Click to Enlarge

Each overshooting rally, within weeks, was met by profit taking and a mean-reversion move back to the lower end of the range. Each overshooting move to the downside, after a few weeks, was met with buying pressure.

Presently, MSFT stock finds itself once again at the very upper end of this channel. That concerns yours truly.

While I do think year-end tailwinds could push Microsoft somewhat higher, shares will need to undergo some better downside consolidation again over the next few months.

On the daily chart, note that after Microsoft reported earnings on Oct. 20, shares proceeded to rally the following day to the tune of about 4%. And they scored a meaningful breakout of a multimonth sideways consolidation phase to boot.

Microsoft MSFT stock chart daily view
Click to Enlarge

By mid-November, MSFT stock had revisited this previous breakout area around the $58 mark as support and bounced since.

Over the past few trading days, Microsoft has consolidated around the October highs and increasingly looks ready to break to fresh all-time highs. A next upside target upon a breakout above $61.30 would be closer to $64, and that may well be a year-end target for the stock.

For risk management purposes, however, traders would be wise to respect any notable bearish reversals as stop-loss signals.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/11/microsoft-corporation-msft-stock-breakout-iplace/.

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