Microsoft Corporation: This Chart Shows Where MSFT Stock Is Going Next
MSFT Stock: Trend Remains Bullish
Once in a blue moon, I stumble upon a stock chart that has me in utter awe. The awe comes from the precise perfection of the painted chart. It is as if the technical analysis gods pulled it straight out of a textbook. I recently found one of these investments. What is it? Would you believe me if I told you it’s Microsoft Corporation (NASDAQ:MSFT) stock?
Microsoft has always been a name synonymous with the personal computer (PC). The first thing that often comes to mind when we hear Microsoft’s name is its “Windows” operating system. With new headlines claiming for years that the death of the PC is coming, I would have thought the windows operating system would be causing some sort of drag for MSFT stock.
In fact, I would have assumed the end of the PC would spell doom for MSFT stock. Fortunately, that has not been the case.
More Upside for MSFT Stock?
MSFT stock has been a star performer, even managing to overcome its 2000 tech bubble high. This is a remarkable feat, given the NASDAQ benchmark index has yet to surpass that high.
Will this healthy performance continue?
A price chart can help determine the health of a current trend and we already know how enamored I am with the MSFT stock chart.
A healthy bull market price chart contains impulse waves and consolidations. Impulse waves describe a strong move coinciding with the main trend of the stock. Consolidations describe a pattern of indecision, as traders digest the current move and get ready for the next one.
The long-term chart of MSFT stock illustrates its health and perfection:
Chart courtesy of www.StockCharts.com
The long-term trend has been dominated by impulse waves (highlighted in green) and consolidations (highlighted in pink). Healthy stock charts display what looks like a staircase from the step-up pattern impulse waves and consolidations create.
From 2012 onward, MSFT shares have been confined to an orderly price channel. The beauty here is that a break of the lower trend line would be reason to step aside. It would signal that the current trend has ended.
It also acts as a tool for traders who want to trade the channel. When the share price hits the upper trend, a trader can sell or short MSFT stock; when shares hit the lower trend, a trader can buy or cover MSFT stock. The precision of the trend allows us to be completely systematic in our trading rules.
The chart below is of the same stock, but it only shows the last two years of trading:
Chart courtesy of www.StockCharts.com
In theory, a measured move is a forecast of the upcoming price based on the previous chart pattern. MSFT stock traded between $39.00 and $48.00 for the majority of 2015. This represented a $9.00 range. A price objective using this criterion would give $57.00 as a target. In October 2015, MSFT stock broke out of this range and proceeded to hit $57.00. This can only be described as a picture-perfect measured move.
The Bottom Line on MSFT Stock
The beauty that is emitted from MSFT stock comes from its precision. The chart is easy to read. The consolidations are straightforward and the impulse waves are easily identified. This example can be placed directly in a technical analysis textbook.
A trader can use these charts to effectively set up systematic trading rules. The long-term chart remains very bullish. At some point, the trend will change, and on that day, my opinion on MSFT stock will change, too.
