Microsoft Shares (MSFT) Dives For A 6th Straight Day...

MSFT $29.26, -0.37%

I recieved an interesting comment in Digg on my daily Microsoft stock action analysis. It kinda goes that "Why are you saying that microsoft is going down when it has been up for 6 months?" Interesting, huh? It is as good as asking why does a ball start to drop when it has been rising through the air for the past 5 seconds after I throw it hard in the air. No matter how long a stock has been rising, it comes a point in time where it must fall, at least a little, to the nearest support level. This is the Law and the way stock actions behave. This is an excellent time for swing traders to make some money to downside. As a technical analyst, I simply watch and read what the chart actions and technical indications are telling me. This puts me ahead of all minor and major trends.

Microsoft (MSFT) continue to show persistent weakness today as it dropped for a straight 6th day. Today, MSFT is showing an inverted hammer candlestick formation. Such a formation tells us that some accumulation is occuring at this level but do not have the strength to persist through the day and is brought back down by the bears by the end of the trading day. However, this is not a strong bear trend we are witnessing in MSFT. This is probably just a slight technical correction to the 100 days or 200 days Moving average support level. Volume has been steadily declining over the past 6 days and that tells us that this swing is not supported by mass concensus and is destined to fail at some point and start accumulating.

With MSFT now in short term deep oversold condition and evidence that some level of buying activity has started to enter the stock, I would revise my short term outlook to a testing of its 100 days moving average. A break to downside from the 100 days moving average of around $29.00 would see a probable testing of the 200 days moving average. Short traders should consider covering at least half your positions by now.



Technical Chart by Worden Brothers TC2007