Microsoft stock could reach new heights

The Dow Microsoft Corporation (MSFT) component is trading a few points off the all-time February high of $ 190.70 and could erupt in the coming weeks, entering a sustained trend with a measured movement target above $ 240. It has already climbed to second in the relative strength of the Dow Jones, just behind Apple Inc. (AAPL), highlighting continued buying interest despite the pandemic and weakening sentiment triggered by recent protests and looting.

The company enjoyed a huge increase in cloud-based metrics in the first quarter due to mandatory stay-at-home orders, with impressive gains reported in video conferencing, gaming and other popular applications. Heavy usage continued into the second quarter, which bodes well for Microsoft’s next generation of consumer software products, including Microsoft 360 and the Windows Core operating system.

The stock maintained a four-year trendline during the first quarter, maintaining its long-term bullish outlook despite technical damage across the market universe. Monthly relative strength readings have now risen, indicating that the bulls have taken control of the long-term price action. However, the upside may need a bullish catalyst or improving overall sentiment to drive investors away and take new positions.

Despite the recovery, Microsoft could struggle with commercial product sales in the next few quarters as slaughtered customers are likely to cut their information technology (IT) budgets to face dramatic revenue shortfalls. IT spending tends to exhibit traditional cyclical properties, with higher spending during periods of economic expansion and lower spending during recessions and downturns. This headwind could eventually end the developing uptrend.

Long term chart MSFT (1990 – 2020)

A multi-year advance ended at nearly $ 60 in December 1999, marking a high that was not questioned for the next 16 years, before falling sharply after the dot-com bubble burst in 2000. The decline extended over 60% through year-end, while a 2001 rebound to the low of $ 30 marked the highest level for the next six years, before testing. 2002 and 2006 to 2000 low. A 2007 breakout added just three points before reversing into a downtrend that shattered the 2001 low during the 2008 economic collapse.

A rebound in the new decade took four years to make a round trip to the 2007 peak, resulting in an immediate breakout that initially stabilized above $ 50 in the fourth quarter of 2014. The bulls have regained control a year later, completing the last leg of the rally in the 1999 high just before the 2016 election. Price action then entered a narrow bullish channel, highlighting increasing institutional buying pressure afterwards. years of slow performance.

Short-term outlook for MSFT

The rally came to a halt in 2018 and resumed in 2019, surpassing the previous high of $ 116 in March, generating the most prolific gains to date of this century. The rise hit an all-time high of $ 190.70 in February 2020 and reversed into a vertical drop, followed by an equally vigorous rebound that stopped just three points below the previous high in May. The stock has consolidated at this price point over the past three weeks, awaiting the necessary catalyst for a breakout.

The Monthly Stochastic Oscillator flipped in February 2020, entering a sell cycle from the overbought level. This selling energy dried up at the end of March, canceling the bearish signal while generating a new bullish cross. This firm tailwind remains in effect as we move forward into the final month of the second quarter, indicating that the bulls remain firmly in charge of long-term price action, despite substantial overall risk.

The bottom line

Microsoft stock has returned to February resistance and could erupt in the coming weeks, entering a new uptrend.

Disclosure: The author did not hold any title in the above titles at the time of publication.