Don't Ignore This Chart

Microsoft Stalls within Uptrend as Stochastic Oscillator Starts to Turn

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.  

Thanks for tuning in and have a great day!
--Arthur Hill CMT

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