Don't Ignore This Chart

Microsoft Stalls within Uptrend as Stochastic Oscillator Starts to Turn

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It always piques my interest when a stock bucks the broader market. Note that SPY and QQQ closed lower the last two days and Microsoft (MSFT) closed higher. Even though it is only for two days, this little morsel of relative strength could foreshadow a bullish resolution to the current consolidation. First and foremost, note that Microsoft is clearly in a long-term uptrend. The price chart sports a serious of higher highs and higher lows with a 52-week high in late January. MSFT stalled over the last five weeks with a triangle consolidation taking shape. A breakout looked imminent when the stock surged last Wednesday, but the breakout attempt at 65 did not materialize as the stock fell back the very next day (blue oval). This reinforces resistance at 65 and a close above this level is needed for a breakout. 


The indicator window shows the 14-day Slow Stochastic Oscillator with the green zone marking the bottom half of its range (0 to 50). A move below 50 signals a pullback or correction in the stock. A subsequent move back above the red signal line signals an upturn. The vertical green lines mark the prior signals. As of Tuesday's close, the Stochastic Oscillator was below 50 and below its signal line. The indicator moved above its signal line early Wednesday, but I will not consider it bullish until it closes above the signal. Yes, I am an end-of-day (EOD) analyst/trader. A move above the signal line would signal an upturn in momentum that could foreshadow a breakout.  

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--Arthur Hill CMT

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Arthur Hill
About the author: , CMT, is a Senior Technical Analyst at StockCharts.com. He has written articles for numerous financial publications including Barrons and Stocks & Commodities magazine. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed technician. In addition to his CMT designation, Arthur holds an MBA from the Cass Business School at City University in London. Learn More
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