Shares of Microsoft (MSFT) are widely held by institutions and individuals. It's a closely watched stock and a member of the Dow Jones Industrial Average (DJIA). Let's check in with the charts and indicators.
In this daily bar chart of MSFT, below, we can see that the price of MSFT started to look toppy in November and December with the On-Balance-Volume (OBV) line declining as price traded sideways - a bearish divergence. Prices broke down below the 50-day and the 200-day moving averages but rallied back above them in late March. MSFT is pulling back in recent days suggesting the rally from $270 has run its course.
The OBV line has weakened in February and March as prices have firmed and that is definitely not a good sign. The Moving Average Convergence Divergence (MACD) oscillator managed to move above the zero line but has quickly narrowed.
In this daily Japanese candlestick chart of MSFT, below, we can see a bearish top reversal pattern this week. In addition the slow stochastic indicator shows an uncommon triple divergence and overbought sell signal. Upside price momentum has begun to weaken.
In this weekly Japanese candlestick chart of MSFT, below, we can see an upper shadow near $315 as traders rejected the highs. The weekly OBV line shows weakness from November and the MACD oscillator has fallen below the zero line for a sell signal. The two moving averages of the MACD indicator are narrowing but that may not go very far if prices continue lower.
In this daily Point and Figure chart of MSFT, below, we can see an upside price target of $387.
In this weekly Point and Figure chart of MSFT, below, we can see that a fair amount of volume has been traded in prices above the market and a great deal of volume just below the market. If prices continue to weaken I suspect a great number of traders will have uncomfortable and unprofitable positions.
Bottom line strategy: Traders should avoid the long side of MSFT. Weakness back below the 50-day and 200-day moving averages is likely to precipitate further declines.
(Microsoft is a holding in the Action Alerts PLUS member club. Want to be alerted before AAP buys or sells MSFT? Learn more now.)
