MSFT Stock: Textbook Bullish
Microsoft has come a long way since it dominated the household personal computer (PC) market with its “Windows” platform. The company has effectively diversified its business line by its acquisition of key companies in growing areas of the technology sector, and I do not believe that many people quite understand this notion. This business strategy has translated into a positive performance for investors.
I am bullish on Microsoft Corporation (NASDAQ:MSFT) stock, and I believe that the positive performance shall continue.
The reason for my bullishness does not dismiss the fundamental valuation completely, but it is heavily reliant on the technical picture from the price chart. I have used price charts to analyze potential investments for over a decade, and I have had great success in doing so. The MSFT stock chart is a textbook version of a bullish uptrend, and anyone wanting to learn about technical analysis should give the price chart a good look.
The following Microsoft stock chart illustrates a perfect bullish trend.
Chart courtesy of StockCharts.com
The bullish trend on the MSFT stock chart is portrayed by the simple trend line highlighted in blue. This line is created by connecting the troughs on the price chart, and it is an exceptional example of an uptrend.
The uptrend has acted as support during this entire bull market that began in 2009. Every time this trend line is tested, buying pressure supports MSFT stock and the trends quickly reverse higher. This trend line can be used to accumulate shares on tests going forward, as well as a level to define risk. If Microsoft stock does trade below this trend line, I would have all the reason I need to believe that this bull market has ended and that a trend reversal toward lower prices has begun.
The price action above the trend line is bullish, and it supports the notion that the trend will continue and that a drop below the trend line is unlikely. The bullishness of the price action is based on the structure of the waves. The trend higher is dominated by impulse waves that are followed by consolidation waves that give way to further impulse waves. Healthy bull markets are littered with such price action, and the chart above is definitely littered with such waves. It is for this reason that I do not believe that the uptrend is in any danger of breaking anytime soon.
The following Microsoft stock chart reinforces my bullish bias.
Chart courtesy of StockCharts.com
The wave structure on this short-term Microsoft stock chart is similar to the long-term chart, and it reaffirms my bullish premise. The nice thing about this wave structure is that I can project a possible bullish price target of $66.00, based on a bullish breakout of the current consolidation wave.
In the summer of 2016, MSFT stock averted a death cross. A death cross is a bearish signal that is generated when the 50-day moving average, highlighted in blue, crosses below the 200-day moving average, highlighted in red. Traders use this signal to confirm that a bear market is on the horizon. Based on this signal, I would have exited any existing positions, as I have found it wise never to trade against it. My bearishness would have been ill-advised, as the signal quickly averted.
Averted signals are powerful indicators, and I have found it pays to apply them to my strategies. Averted signals are a reason to unwind and reverse a position. This is why after the averted signals are generated, it is not uncommon for the trend to accelerate.
The Bottom Line on Microsoft Stock
I am bullish on Microsoft stock, and my bullishness is strictly based on the signals generated from the beautiful MSFT stock chart. My bias on Microsoft stock will remain bullish until the price chart gives me reason to believe otherwise.