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Featured Trade (US Stock): Exhaustion signals seen in Microsoft right below all-time high

Medium-term technical outlook (1-3 weeks) on Microsoft (MSFT)

click to enlarge charts

Key technical elements

  • Microsoft (MSFT), a key component stock in the benchmark S&P 500, top three in terms of market capitalisation has staged a gapped up in yesterday, 14 Mar to print a high of 115.00. Current close price of 114.50 is just only 1.5% away from its current all-time high level of 116.18 printed on 03 Oct 2018.
  • Given its significant weightage in the S&P 500, its on-going push up in price action since Mon, 11 Mar 2019 has led the S&P 500 to erase last week’s losses and challenged the 2815 key long-term pivotal resistance again despite the steep losses seen in Boeing (the top weightage component stock in DJIA) (click here for a recap on our weekly technical outlook for stock indices published earlier).
  • The on-going up move of MSFT has continued to evolve within a bearish “Ascending Wedge” configuration since 26 Dec 2018 low and it has formed a daily “Spinning Top” candlestick at the end of yesterday, 14 Mar U.S session.
  • The upper boundary of the “Ascending Wedge” confluences with the current all-time high level of 116.18 which also coincides with a Fibonacci expansion cluster.
  • The daily RSI oscillator is approaching its overbought zone. In addition, the volume reading has been lacklustre since the start of the recovery from 26 Dec 2018 versus the prior decline phase from 07 Nov 2018 to 26 Dec 2018.

Key Levels (1 to 3 weeks)

Pivot (key resistance): 116.18

Supports: 110.00 (trigger), 107.90 & 102.05

Next resistance: 119.40/90


Therefore, the price action of MSFT has started to exhibit bullish exhaustion elements which may indicate that the recovery from 26 Dec 2018 low of 93.96 may be running out of steam.

If the 116.18 pivotal resistance is not surpassed and a break below 110.00 is likely to reinforce a potential multi-week decline to target the next supports at 107.90 and 102.05 (swing low areas of 14 Jan/29 Jan 2019 & 61.8% Fibonacci retracement of the up move from 26 Dec 2019 low to 13 Mar 2019 low).

On the other hand, a clearance above 116.18 shall see MSFT skyrocket to a new all-time high level of 119.40/90 (Fibonacci expansion cluster).

Charts are from eSignal


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