by Serge Berger | March 19, 2014 7:58 am
Software giant Microsoft (MSFT) just saw one of its better one-day jumps in a long time, and at one point during Tuesday trading, MSFT stock got close to breaking $40 per share for the first time since July 2000.
The reason for the rally? Microsoft CEO Satya Nadella is said to be scheduled for a press conference in San Francisco next week on March 27, and rumors are flying that he’ll be introducing Office for the iPad. This is a move investors have urged MSFT to do for ages, as the ever-expanding use of tablets is pleading for Microsoft Office products.
As tablets continue to morph into laptop-like products, and vice versa, business folks on the go are increasingly trying to ditch the dual-computer systems and make do with merely a tablet. However, iPad users thus far have had to resort to non-Microsoft spreadsheet and word processing software. From my own experience, I can tell you that brings up more than a few hassles.
Additionally, investment house Barclays on Tuesday raised its price target for MSFT stock from $43 to $44, which further helped the rally.
So after Tuesday’s nearly 4% move, MSFT stock has put more separation between itself and the $38 area, which on the below multiyear weekly chart is marked by the black horizontal. Ever since 2001, Microsoft stock has found this area to be of great struggle to overcome.
After the stock’s capitulation low in 2009, however, MSFT stock began a more sustainable move higher, which over the past few months again began to cuddle up near the long-term resistance area.
Investor sentiment toward Microsoft has also begun to improve over the past couple of years as the company made what look to be more serious and sustainable moves into newer technologies in the mobile space and recently announced its new CEO, Satya Nadella.
In other words, the news flow has also matched up with the stock’s much more solid posture, and this through the long-term lens is constructive.
On the daily chart below, note how MSFT stock since early December of last year once again bumped into the long-term resistance area. Then, over past few weeks, the stock began to coil up in an unusually tight fashion, which ultimately led to yesterday’s breakout rally. The breakout not only took the stock past the two-week resistance mark but also past its December highs.
Given the positive construct that I discussed above, MSFT stock now stands a good chance of further gains in coming weeks, and that gets me very interested to be involved in the stock from the long side.
Should MSFT quickly reverse course in coming days, however, then caution would be warranted as such “breakout fakeouts” can lead to nasty pullbacks.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
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