Microsoft Stock Is on the Defensive: What Investors Can Expect Now

Let's check out the charts and indicators to get a sense of the downside risk.

Microsoft Corp. (MSFT)  shares are lower in early Thursday trading as investors react to the tech giant cautioning that at least one portion of its business (PC/Windows) won't meet current quarter revenue forecasts. Let's check out the charts and indicators to get a sense of the downside risk.  

In the daily bar chart of Action Alerts PLUS holding MSFT, below, we can see that the prices were already testing the rising 50-day moving average line. We are likely to see prices gap below this indicator. The 200-day moving average line is rising and intersects in the $145 area and I would not rule out a test of this indicator in the days/weeks ahead.

Trading volume has been very heavy this month and suggests that we may have seen a shift in ownership from strong hands to weak hands. The daily On-Balance-Volume (OBV) line shows a small turn to the downside telling us that sellers have become more aggressive. I would anticipate that the OBV line continues lower.

The Moving Average Convergence Divergence (MACD) oscillator has already crossed to the downside for a take profits sell signal. 

 

In this weekly bar chart of MSFT, below, we can see that prices had already begun to weaken. The OBV line was turning lower and the MACD oscillator had begun to narrow.  

 

 

In this daily Point and Figure chart of MSFT, below, we can see that a potential downside price target in the $138 area is projected.  

 

 

 

Bottom-line strategy: MSFT made a five-month sideways consolidation pattern last year and that should act as strong support, but I would l

 

(Microsoft is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells MSFT? Learn more now.)

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Action Alerts PLUS, which Cramer manages as a charitable trust, is long MSFT.