Blogs -Microsoft Stock Price: Technical Analysis

Microsoft Stock Price: Technical Analysis


October 29, 2019

author

Knox Ridley

Portfolio Manager

Unlike most tech stocks, Microsoft’s stock price has over 30 years of trading action to analyze. With more data to analyze, I tend to lean heavier on Elliott Wave theory to predict Microsoft’s future. stock price because of the many layers of wave patterns that will naturally unfold over time.

This is a guest post provided by Technical Analyst, Knox Ridley

This article will lean exclusively on Technical Analysis as we start from a monthly chart and zoom into a daily chart to reach the conclusion that Microsoft’s stock price may have some upside left in the trend, but a sharp decline is in the near future, followed by a multi-year renewed uptrend.

Multi-Decade Picture of Microsoft’s Stock Price (monthly charts)

multi-decade picture of microsoft's stock price monthly charts

The red extensions are based off the length of Wave I, and then placed at the base of Wave II. The extensions are thus measurements of Wave 1 combined with the internal Fibonacci Ratios (outlined on the right of the chart).

Above is the monthly chart on Microsoft’s stock price going back to its IPO. We have a massive 5-wave pattern unfolding that perfectly aligns with Fibonacci ratios. The exact ratios we use on a daily chart are thus present on a monthly chart, and if you follow the ratio lines in red, you can easily see how the price reacts to these specific levels. It’s because of this that I lean on Elliott Wave as an estimation for the overall direction of Microsoft’s stock price, especially when we can analyze so many layers, and especially considering we are on the final leg of a 30 year 5-wave cycle.

Also Read : Why Microsoft (Not Amazon) Will Win the Pentagon Contract

microsoft stock price chart

The red extensions are based off the red cycle count that started at MICROSOFT’s IPO. The Fibonacci circles are based off the 3rd wave high and the 4th Wave low.

Not only can we use Fibonacci ratios to estimate support and resistance zones, but we can also use the same ratios to gauge the timing of an uptrend. I only use this technique on large trends, but as you can see above, Microsoft’s stock price tends to warp, bend and react to these levels, as well. In some instances, they act as strong resistance and support.  

From my estimation, the price is coming to an inflection point between time and price. The price is moving closer to the 400% resistance circle in black, and is currently hovering between the red 350% and 338.2% price levels in red.

I’m expecting Microsoft’s stock price to make a distinct move within the coming weeks as we approach this inflection point. Either the price will turn down in a corrective fashion, or after bouncing around the resistance levels, we should see the price continue to the next level.

2009 Bull Market (weekly chart of stock price)

microsoft weekly chart of stock price

Each count has its own internal extensions, which match the color of the count. Red indicates the extensions of the large cycle count, blue represents the primary count off the 2009 low, and the orange represents the retrace level of 3rd wave within the primary count.

If we dive deeper into Microsoft’s price action on a weekly chart, we can see the uptrend from the 2009 low until now. Keep in mind, the large cycle uptrend that started from the IPO, which is highlighted in red, is composed of its own 5-wave structure. Since 2009, we have been in the final 5th wave of the red cycle count, and that count is comprised of the 5-wave primary count, which is highlighted in blue, circled numbers.

Also Read : Microsoft Earnings Likely to Prove Cloud Isn’t Slowing Down

My best estimation of this primary count has us pushing to the end of a 3rd wave and possibly just now entering the 4th wave correction. Third waves are typically accompanied by peak technical and is present in the MACD, which is another indicator that we may be close to topping. Also, the 3rd wave will typically reach the 161.8% extension. In this case, we have an extremely extended 3rd wave that reached the 223.6% extension as well as the top of the trend line in blue.

I’m expecting the 4th Wave to correct to the target zone I’ve highlighted in the green box eventually, which is between the $120 – $92 price range. Keep in mind, the $92 price range, though may seem extreme, but it is only the 23.6% retrace level.

It’s worth noting the big picture ahead of us, and the inevitable downside we will face. However, it’s also worth noting that this could take months to play out before we hit a final bottom in the 4th wave drawdown. In the mean-time, I believe the daily chart offers some clues to the short-term direction of Microsoft’s stock price.

msft stock price chart

If we zoom-in further using the daily chart, we are looking at the final push of the 5th Wave of the 2009 uptrend. What’s worth noting is how well Microsoft has held up as the bulk of cloud stocks are experiencing significant drawdowns. That alone is a show of short-term strength, which should be noted.  

Furthermore, Microsoft is trading into an upward sloping triangle pattern, which is highlighted in blue. Price has virtually been rangebound, sloping upwards in a narrowing band. Notice how the RSI has been moving in its own triangle pattern. When I see this, it tells me that the RSI is resetting for the next move higher. The internals are coiling, building up strength, while price is staying stable.

Seeing consolidation of both the price and RSI at all-time highs is bullish, in the near term. Today, Microsoft gaped through the upward resistance, making all new highs, which means we will likely see a continuation of the extension to new highs.

However, if we close below the $128.5 support region, I expect the 4th wave correction to be in effect. If we break to the upside, and close above the $146. 50 region, I expect the bull market in Microsoft to resume as we extend further in this 3rd Wave push.

Also Read : Here’s Why Microsoft Stock Could Overtake Amazon on Cloud Infrastructure

Conclusion

Cloud is priced for perfection, even after a large rotation out of the sector that is still in progress. Microsoft’s earnings and short term technicals show that the price probable will extend further, extending the 3rd wave push of the primary count off the 2009 lows. If you want to play the long side, I would place a stop just under the $128.50 support region, and consider that the time to invest for the long haul is not at current prices.

This market environment is about playing momentum with tight stops. Even though the long-term analysis is showing a pullback in the future, there is still some opportunity to ride the remainder of this bull market with momentum, as Microsoft leads the way.

The big picture is to capture the final 5th Wave push after the 4th Wave correction takes place. When we bottom, Microsoft will be one of my core holdings as we get the final push of this 30-year cycle trend.

Gains of up to 485% from our Free Newsletter.


Here are sample stock gains from the I/O Fund’s newsletter --- produced weekly and all for free!

+370% on Nvidia

+485% on Bitcoin

*as of May 02, 2024

Our newsletter provides an edge in the world’s most valuable industry – technology. Due to the enormous gains from this particular industry, we think it’s essential that every stock investor have a credible source who specializes in tech. Subscribe for Free Weekly Analysis on the Best Tech Stocks.

If you are a more serious investor, we have a premium service that offers lower entries and real-time trade alerts. Sample returns on the premium site include 2583% on Nvidia, 806% on Chainlink, and 665% on Bitcoin. The I/O Fund is audited annually to prove it’s one of the best-performing Funds on the market, with returns that beat Wall Street funds.

beth

More To Explore

Newsletter

Amazon Building

Amazon Stock: Nearing $2 Trillion Club From AWS Growth & Ads Catalyst

Amazon is on the verge of joining the $2 Trillion Club, driven by a 4-percentage point accelerating in AWS to 17% YoY growth combined with strong 25% growth in advertising revenue.

May 21, 2024
Big Tech Logos

Big Tech Q1 Earnings: AI Capex Increases As AI-Related Gains Continue

Recent Q1 earnings releases from Microsoft, Amazon, Alphabet and Meta reaffirmed that AI spending is continuing to increase through 2024 as companies seek AI-related revenue gains.

May 14, 2024
The Risk is Higher in the Market than it Feels

The Risk is Higher in the Market than it Feels

In this report, we will show that the sentiment readings over the last several months suggest investors should be cautious. This is backed up by our broad market analysis, which indicates that risk is

May 02, 2024
We Are Raising Our Bitcoin Targets To $106K - $190K

We Are Raising Our Bitcoin Targets To $106K - $190K

Bitcoin is an asset where the bulls pound the table to “buy, buy, buy,” and the bears relentlessly and stubbornly call it a scam. In reality, both are the wrong approach. This is because although Bitc

April 26, 2024
Investing In AI with Beth Kindig: 1-Hour Video Interview

Investing In AI with Beth Kindig: 1-Hour Video Interview

Jordi Visser, CIO and Chairman of Weiss Multi-Strategy Advisers, spoke to Beth Kindig on the Real Vision podcast on March 20th, to dive deep into AI’s potential for explosive economic growth, how to f

April 19, 2024
https://images.prismic.io/bethtechnology/Zh50DEaI3ufuUONy_SemiconductorStocksQ4OverviewAIGainsHeatUp.jpg?auto=format,compress

Semiconductor Stocks Q4 Overview: AI Gains Heat Up

Semiconductor stocks are standout performers so far in 2024, with investor appetite for AI stocks remaining elevated as AI chip leader Nvidia continues its streak of high growth.

April 15, 2024
I/O Fund Catapults to 131% Cumulative Performance Due to Leading AI Allocation

I/O Fund Catapults to 131% Cumulative Performance Due to Leading AI Allocation: Official Press Release

I/O Fund, a tech research site that actively manages a real-time portfolio, announces returns of 57% in 2023 with a cumulative return of 131% since inception. This compares to popular tech ETFs that h

April 03, 2024
The Importance of Verified Returns and Risk Management for Retail Investors

Verified Returns & Risk Management: A Retail Investor's Imperative

Last year was a stellar year for investors – in 2023, the Nasdaq 100 rose 54% for its best annual return since 1999, while the S&P 500 gained 24%. The Magnificent 7 were the de facto leaders of this m

March 27, 2024
ARM Building

Arm Stock: AI Chip Favorite Is Overpriced

Arm Holdings is positioned to capitalize on the growing adoption of artificial intelligence (AI) technologies, leveraging its established licensing model and extensive ecosystem to drive future growth

March 26, 2024
Meta Building Picture

Top 3 Ad-Tech Stocks For 2024

Ad spending growth is widely forecast to accelerate in 2024, after a challenging macro environment significantly dented budgets and growth in 2023. The US advertising market is already showing positiv

March 18, 2024
newsletter

Sign up for Analysis on
the Best Tech Stocks

https://bethtechnology.cdn.prismic.io/bethtechnology/e0a8f1ff-95b9-432c-a819-369b491ce051_Logo_Final_Transparent_IOFUND.svg
The I/O Fund specializes in tech growth stocks and offers in-depth research for Premium Members. Investors get access to a transparent portfolio, a forum, webinars, and real-time trade notifications. Sign up for Premium.

We are on social networks


Copyright © 2010 - 2024
Get Free Weekly Analysis on the Best Tech Stocks