Microsoft - End of an era / back to the 80s
PRIOR BEAR MARKET
After such a disappointing day across all markets, Microsoft of all names is now showing signs of topping out. The first time since 2000. Back then, Microsoft corrected over time rather than just in price. Taking 9 years before finally capitulating for a 62% total decline. Given it’s gradual ascent in recent years, something similar may now lie ahead.
CURRENT PRICE ACTION
A close below $262 and Microsoft will paint a sell / short signal. RSI has already crossed into a bearish zone (below 40) on the weekly timeframe, suggesting an almost inevitability to downside price action.
Like AMD, MSFT is showing signs of topping in the exponential channel (shown in the main chart above) and has closed below the top of it twice in the past 6 months. Next step for confirming the bearish case, would be to fall below the 50 week MA of $262.
BEARISH TARGETS
Assuming this happens in the coming days, we can start talking about targets. The top of the purple consolidation area, became a firm bottom last time around. If this were to play-out again this would represent a 70% decline, at a price of $78. The 0.618 fib retracement sits at $105 if you find comfort in a more reasonable and less aggressive target.
BULLISH TARGETS
If this one doesn't go as anticipated, a close above $310 would prolong and delay the bearish thesis. Regardless, MSFT is looking awfully toppy here, with a price to earnings ratio of still 31.9. Take profits and stay clear on buys at the very least. Any further upside is limited. Let's keep an eye on this one for the next 5-10 years…
SIDE NOTE
This chart has traded so textbook perfectly since 1986, that it has made for such simple investing and a near-perfect case study for this exponential indicator. If you'd acquired a position for $2,000 back then, you would be sitting on $10,634,879, with still an open position of 101k. Astronomical gains.
After such a disappointing day across all markets, Microsoft of all names is now showing signs of topping out. The first time since 2000. Back then, Microsoft corrected over time rather than just in price. Taking 9 years before finally capitulating for a 62% total decline. Given it’s gradual ascent in recent years, something similar may now lie ahead.
CURRENT PRICE ACTION
A close below $262 and Microsoft will paint a sell / short signal. RSI has already crossed into a bearish zone (below 40) on the weekly timeframe, suggesting an almost inevitability to downside price action.
Like AMD, MSFT is showing signs of topping in the exponential channel (shown in the main chart above) and has closed below the top of it twice in the past 6 months. Next step for confirming the bearish case, would be to fall below the 50 week MA of $262.
BEARISH TARGETS
Assuming this happens in the coming days, we can start talking about targets. The top of the purple consolidation area, became a firm bottom last time around. If this were to play-out again this would represent a 70% decline, at a price of $78. The 0.618 fib retracement sits at $105 if you find comfort in a more reasonable and less aggressive target.
BULLISH TARGETS
If this one doesn't go as anticipated, a close above $310 would prolong and delay the bearish thesis. Regardless, MSFT is looking awfully toppy here, with a price to earnings ratio of still 31.9. Take profits and stay clear on buys at the very least. Any further upside is limited. Let's keep an eye on this one for the next 5-10 years…
SIDE NOTE
This chart has traded so textbook perfectly since 1986, that it has made for such simple investing and a near-perfect case study for this exponential indicator. If you'd acquired a position for $2,000 back then, you would be sitting on $10,634,879, with still an open position of 101k. Astronomical gains.
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