Stock Market Analysis

Tuesday, February 13, 2007

Microsoft Shares (MSFT) Goes Marching On...

MSFT $28.94, -0.14%

Microsoft shares (MSFT) goes marching on southwards with yet another lower low and lower high. Today, MSFT's chart displayed a typical candlestick continuation pattern where a day of significant drop is followed by a couple of days of smaller drops. We saw the same pattern back on 6 Feb 07. This pattern usually mean more downside coming up, however, we see some exceptions today. Unlike the continuation pattern on 6 Feb 06, MSFT's short term MACD indicated a loss of downside momentum along with a drop in volume versus yesterday. This tells me that there is a lack of followup to the drop yesterday and that this correction is not supported by mass concensus. Such a trend may not last very long. A strong correction that really cause damage and concern must be backed up by the kind of strong volume that we saw back in the May 2006 correction.

Every analyst in the world today is calling for a buy on MSFT and shouting out that MSFT is "On Sale". That served to breed bullishness and further eliminate bearish sentiments in the markets.

With a loss of downside momentum and a shaky level of participation to downside, I would say that the $28.00 support level is going to be a strong one. In fact, I will not be surprised if MSFT starts to turn before that level is reached. For now, I remain Bearish on MSFT.



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2 Comments:

Blogger L.J. said...

My position in Feb 30 puts hope you're right! I too think MSFT is going lower but I'd REALLY like it to go lower this week before my puts are set to expire. :)

6:29 AM  
Blogger Jason Ng said...

Well, like I have analysed, MSFT may start to turn sooner than we expect and looks like it is doing so already... it may not have the energy to stay down till expiration... you probably want to cover half your position by now.

4:48 PM  

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