It’s been a stellar year for Microsoft shares so far and in sharp contrast to that of 2018, where the stock wallowed in congestion in the second half, before moving firmly higher in the first quarter this year. And with the trend developing strongly, it’s no wonder this remains a firm buy among the analysts from both a fundamental and technical perspective. What the weekly chart for the stock also highlights is Wyckoff’s second law of cause and effect. In other words the effect of time and the extent of any trend which develops thereafter.
Starting with earnings, Microsoft has beaten expectations by some distance in each of the last four quarter earnings, with earnings per share rising from $1.14 in March to $1.37 for the most recent release in June, and which exceeded the forecast by over 13%. This was marginally lower than the previous which beat the expected of $1 by 14% coming in at $1.14. Nevertheless, excellent results which have helped to provide further momentum to the bullish trend higher.
From a technical perspective on the weekly chart, there is little to suggest any slowdown in the move higher, and ahead we have a low volume node on the volume point of control histogram which suggests price should move through here relatively unopposed and through the $140 per share level with ease. This is similar to the move we witnessed in March and April as the breakaway took hold, with with the low volume node providing little in the way of a barrier. In addition, the move higher was also accompanied by good volume. The $130 per share resistance area denoted with the blue dashed line of the accumulation and distribution indicator for NinjaTrader did present a barrier throughout May, but with this now cleared provides a good platform of support. The trend monitor remains firmly blue with the stock set fair for further gains in the longer term.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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