Shares of Microsoft Corporation (NASDAQ:MSFT) have rallied about 5% so far in 2016. But in the bigger picture, shares continue to consolidate just below all-time highs from late 1999/early 2000, when Microsoft stock peaked during the so-called “Internet Bubble.”
Barring any major outside forces, MSFT stock — in my eyes — remains a buy on the dip or breakout. And the charts currently give active investors and traders some well-defined areas that they can trade around and manage their risk.
When Microsoft reported its latest batch of earnings on July 19, it beat analyst expectations on both the top and bottom lines. Moreover, it made positive comments about its cloud business, which continued to grow at a healthy clip. Investors and traders loved the news and propelled Microsoft stock past a key technical resistance area.
That also put MSFT near levels last seen in Q1 of the year 2000.
Don’t ignore the continued chase higher of dividend-paying large-cap U.S. stocks. Record-low bond yields have likely benefited Microsoft stock, which has a yield of around 2.5%. Treasuries, meanwhile, yield just 1.6%.
But MSFT hasn’t rallied on yield alone. The company deserves credit for its move toward cloud services, less reliance on things such as its Office products and even the success of its tablet PC called the Microsoft Surface.
Microsoft Stock Charts
We see that the sharp rise off the 2009 lows currently has MSFT stock trading just a couple percentage points off its all-time highs, set back in late 1999. In the bigger sense, we also see that Microsoft shares have largely been consolidating since late 2015. This phase has Microsoft stock coiling up just below all-time highs.
Through this lens, Microsoft ultimately could plow to new all-time highs in the not-too-distant future.
Moving on to the daily chart, we see that Microsoft stock gapped higher and rallied more than 5% after the earnings report on July 19. This set the stage for a break past a well-defined technical resistance line just a couple of weeks later.
Over the past couple of weeks, MSFT shares have once again settled into a consolidation phase, which thus far is taking place above previous resistance (i.e., above the mid-$50s). The longer this consolidation phase holds, the better the odds of a break higher.
Active traders and investors could look to buy MSFT stock upon a break and hold above $58.50 for an attack on the all-time highs and initial break above in the low $60s.
It could take more time for Microsoft to actually break through its all-time highs on a more sustainable basis. But a break out of the current tight trading range, and thus an assault at those old highs, is well worth a shot.
Like what you see? Sign up for our daily Beat the Bell e-letter and get Serge’s investment advice delivered to your inbox every morning! Download Serge’s Free Special Report: 6 Keys for Successful Trading and Investing.
More From InvestorPlace
- 7 Rare Value Stocks in This Overpriced Market
- 7 Healthcare Dividend Stocks for Quality and Security
- The Worst Stocks on Wall Street