Featured Trade US Stock Microsoft may see more pain ahead

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

Key technical elements

• Microsoft, another key bellwether stock that is seemed to be off the media radar after the recent Apple’s Q1 revenue downgrade announcement out 2 days ago on 02 Jan 2018. In fact, traders and investors should pay close attention to the stock price of Microsoft next as it took less hit in Dec compared to the carnage seen in the group of big technology “F.A.A.N.G” stocks. Since is Oct 2018 all-time high of 116.18, Microsoft has recorded a decline of 19% to print a low of 93.98 on 24 Dec 2018 low versus an average decline of 30% seen in the “F.A.A.N.G” stocks. Thus, it recent outperformance (decline by a lesser magnitude) has made Microsoft, the most valuable company, in terms of market capitalisation ahead of Apple and Amazon.  Also, Microsoft is now the biggest weightage component stock in the S&P 500 and Nasdaq 100.
• Since its Oct 2018 all-time high of 116.18, the share price of Microsoft has evolved into a medium-term downtrend phase. The recent post Xmas rebound of 9.10% from its 24 Dec 2018 low of 93.98 has stalled and reversed down from the former range consolidation support from 30 Oct/19 Dec 2018.
• The recent downward reversal seen in the prior 3 trading sessions since 31 Dec 2018 has been accompanied by an increased in volume. In addition, downside momentum remains intact as the daily RSI oscillator remains bearish below its significant corresponding resistance at the 55 level and has not reach an extreme oversold level.
• The key medium-term resistance stands at 102.32 which is defined by the 200-day Moving Average and the former range support from 30 Oct/19 Dec 2018.
• The next significant medium-term support rests at the 87.56/86.20 zone which is defined by the swing low areas of 08 Feb/23 Mar 2018, the major primary ascending trendline in place since Aug 2015 low and a Fibonacci extension cluster.

Key Levels (1 to 3 weeks)

Immediate resistance: 99.35

Pivot (key resistance): 102.32

Supports: 93.98 & 87.56/86.20

Next resistance: 112.24

Conclusion

The medium-term downtrend phase in place since 03 Oct 2018 remains intact for Microsoft. Key elements advocate the potential start of another impulsive downleg to retest the recent 24 Dec 2018 low of 93.98 before targeting the next support zone of 87.56/86.20 if the 102.32 key medium-term pivotal resistance is not surpassed.

On the other hand, a clearance above 102.32 invalidates the bearish scenario for a squeeze up to retest the late Oct/early Dec 2018 range resistance of 112.24.

Charts are from eSignal