MSFT Stock: Picture Perfect
I am bullish on Microsoft Corporation (NASDAQ:MSFT) stock, and the sole reasoning behind my bias is the beautiful and bullish MSFT stock chart. It might be difficult for some to grasp the notion that any type of information can be ascertained from a price chart of a stock. In some cases, that notion is correct, because not all price charts are constructive, but this does not apply to the Microsoft stock chart.
I look for certain patterns and signals in a price chart, and only when my criteria is met can I apply my findings to a trading strategy. My strategies are simple rules that I set and follow prior to entering a trade. The logistics behind my strategies are not important, only my trading bias is. The following charts illustrate the signals and patterns that I used to develop my bullish bias on Microsoft stock.
The following Microsoft stock chart illustrates the precision of the price movements.
Chart courtesy of StockCharts.com
The MSFT stock chart above spans eight years and illustrates how precise and defined the trend higher in share price is. The long-term trend has been dominated by impulse waves (highlighted in green) and consolidations (highlighted in purple). Healthy stock charts look like a staircase from the step-up pattern that they create. The trend is dominated with higher highs and higher lows. This trading action defines a trader’s definition of an uptrend, and this one is especially easy to see and identify.
From 2009 onward, shares have been supported by an uptrend line. The beauty here is that a break of the lower trend line would be reason to step aside as it would signal that the current trend has ended. It also acts as a tool for traders who want to time entry points. The precision of the trend allows me to be completely systematic in my trading rules.
The following MSFT stock chart illustrates the most recent bullish development.
Chart courtesy of StockCharts.com
A moving average cross is a momentum indicator. MSFT stock is currently sitting with these moving averages in a bullish position known as a golden cross. As I have explained previously, a golden cross is executed when the 50-day moving average crosses above the 200-day moving average and remains in play until the moving averages cross in the other direction. The exact opposite of a golden cross is a death cross, which alludes to a bear market being on the horizon.
In July, MSFT stock attempted to generate a death cross, but that signal was quickly averted. Averted signals are a favorite of mine, as the outcome of such a signal usually amounts to increasing the speed and slope of the current trend. I have seen many explosive moves created on the backs of a failed signal.
To further clarify why such explosive moves are attributed to failed signals, I will do my best to explain. Traders witness the bearish cross and initiate short positions or exit their long positions. As the signal quickly averts, the traders who based their trading decision on this signal are now caught offside and need to quickly reverse their positions. The reversing of positions adds fuel to the move and a surge in the share price is not an uncommon event.
The price action on the chart supports the bullish premise. The lines highlighted in purple construct the trading range that has contained MSFT stock for approximately nine months. Microsoft stock effectively oscillated within this range until said range was broken in July 2016. It is not uncommon for shares to trade back and test a previous area of resistance. MSFT stock has just successfully backtested the top of the range and is now attempting to create a new all-time high.
I love new all-time highs because they amount to blue sky flying, where no overhead resistance exists and the path of least resistance is higher.
The Bottom Line on Microsoft Stock
The chart of MSFT stock is a bullish masterpiece. I have not come across many charts like this one in my day. Charts like this are easy to see and even easier to trade. I do not need any other reason to be bullish on this position. My bias on Microsoft stock is bullish and will remain so until that dominant uptrend line is broken.