The daily chart for Microsoft is one with many interesting aspects, all of which are helping to confirm the bullish sentiment for this stock, which is also benefitting from the strong uptrend now in place with the primary indices.
And whilst it is a chart punctuated with gaps, the key one occurring towards the end of October when the stock opened gapped up and well above the resistance which had until then been building in the $141.50 per share area. This level is denoted with the red dashed line of the accumulation and distribution indicator which prints these levels automatically, and more importantly, their strength is defined by the width of the line. The volume associated with the breakout was high thereby confirming this as a genuine move and not a fake trap move. This was further confirmed four days later with the narrow spread down candle and lower wick with identical volume confirming the break. The conclusion is simple and volume price analysis 101. If it had been selling, the candle would be wide spread with no lower wick. It is not, and therefore an anomaly and signalling buying. This was confirmed three days later with a repeat candle, but this time on average volume. In other words, we are revisiting an area which had previously seen high volume and is now low. The conclusion again is simple. The selling pressure has now been absorbed and the market makers are ready to resume the move higher which begins almost immediately. This is the concept of a low volume test.
Since then we have seen the stock move steadily higher, and note the volume. Rising price and rising volume, an excellent signal and therefore telling us there is more to come from Microsoft in due course. Note the trend monitor indicator confirming the move, and with a low volume node now ahead on the volume point of control histogram, it is an excellent technical picture for MSFT as the stock prepares for a solid move through the $150 price level.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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