Shares of Microsoft Corporation (NASDAQ: MSFT ) on Dec. 11 closed higher for the fourth day in the past five trading sessions and also scored a technical breakout of a multiweek bullish consolidation phase. Active traders and investors now have a long-side trade in MSFT to sink their teeth into.
Source: Mike Mozart Via Flickr
Shares of Microsoft are having a fantastic year along with other large cap technology stocks - up by more than 35% so far. Over the past few weeks in this column, I have reiterated my reasons why large-cap tech stock winners for 2017 are likely to continue holding their bid into year-end … in good part due to underperforming fund managers having to chase these stocks higher still and add to their portfolios for window dressing purposes. MSFT stock in my eye fits right into this category.
Few stocks even in tech land in 2017 have exhibited the type of clear up-trend as MSFT stock, which along the way has held simple support lines and moving averages in what has been and so far continues to be one heck of a trend following story.
MSFT Stock Charts
Click to Enlarge
Moving averages legend: red - 200 week, blue - 100 week, yellow - 50 week
While I currently see a trading opportunity, I must first point to this stock's longer-term weekly chart which in my eye is dramatically overbought. Note that in 2016 MSFT stock finally cleared above its previous all-time highs from late 1999 and early 2000.
Since the late-2016 breakout, the stock has never looked back and in fact simply gone vertical, which now has it in serious overbought territory by most momentum oscillators including the MACD at the bottom of the chart.
To be clear, this does not mean that MSFT stock is imminently in danger of a big mean-reversion move lower, but for me this current juncture makes it a low probability place to add to longer-term positions.
Click to Enlarge
Moving averages legend: red - 200 day, blue - 100 day, yellow - 50 day
On the daily chart, we see that after Microsoft reported its latest batch of earnings in late October the stock gapped higher and quickly became overbought. MSFT stock then consolidated in a sideways to slightly downward motion which on Dec. 4 once again found support at the yellow 50-day simple moving average. The stock then began to rally again in recent days and yesterday finally managed to close above the post-earnings highs on a daily closing basis.
From here, while the stock may be immediate term overbought it does stand a good chance of moving higher toward $88 and $90 for now and possibly into year-end.
Any strong bearish reversal on a daily closing basis is a stop loss signal from a trading perspective.
Check out Anthony Mirhaydari's Daily Market Outlook for Dec. 12.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.