In the recent days and weeks, Jim Cramer has been using his research skills to uncover stocks that can be bought in this troubling environment. One name we know is Microsoft (MSFT) .
Let's check their charts and indicators.
In this daily bar chart of MSFT, below, we can see a number of positive developments. On the price chart of MSFT we have added the S&P 500 Index (SPX) and we can see that MSFT has outperformed the SPX over the past 12 months. More importantly I want to point out that MSFT outperformed in the past two months.
Over my years of watching the markets I have found that the stocks that go down the least in a bear market are often the next leadership. We can also see that prices have rallied back above the rising 200-day moving average line. The daily trading volume showed a huge increase in the past five weeks and that suggests a possible change in ownership as weak longs sold and deep pocketed investors bought.
Notice the very shallow decline in the On-Balance-Volume (OBV) line in recent weeks which suggests that investors have largely held onto their long positions.
The 12-day price momentum study shows equal lows this month versus the lower lows in price. This is a bullish divergence (one of the three categories) and can foreshadow a rally in the stock.
In this weekly bar chart of MSFT, below, we can see how shares of MSFT have outperformed the S&P 500 Index over the past three years. Prices broke below the rising 40-week moving average line for two weeks but prices are back above it this week.
The weekly OBV line shows a short decline while the Moving Average Convergence Divergence (MACD) oscillator is still well above the zero line and only signaled a take profits sell signal earlier this month.
In this daily Point and Figure chart of MSFT, below, we can see how prices have made a turn to the upside. The software is projecting a potential upside price target in the $202 area.
Bottom line strategy: MSFT might dip briefly below $150 and that is probably a dip to buy. Risk a close below $140. The round number of $200 is our price target for late 2020.
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