Software giant Microsoft Corporation (MSFT) spent the better part of the past decade building what in hindsight may have been a significant bottoming formation on the stock’s chart. Plagued from the commoditization of the PC industry, among other things, the stock just couldn’t find any upward momentum that stuck around for longer than a handful of months at a time before running into price resistance again. Of course the charts of the other PC era darlings, such as Intel Corp (INTC) and much worse so any of the box makers such as Dell Inc (DELL) look similar to that of Microsoft Corporation (MSFT). Over the past couple of weeks however, specifically both Microsoft Corporation (MSFT) and Intel Corp (INTC) have rallied strongly in-sync. While both stocks are still far from any late 90’s levels (and likely will be for a long time), the recent rally, which comes on an uptick in volume is none-the-less worth pointing out.
More specifically on the long-term chart of Microsoft Corporation (MSFT), the recent rally has brought the stock into an initial resistance zone, which if overtaken should over time move the stock back up to a decade-long resistance point around the $37.50 area.
The steep 13% rally in Microsoft Corporation (MSFT) over the past week or so of trading brought the stock right into a 12 month long resistance area near $33.00. While near-term overbought, the stock’s breakaway gap (lower arrow on chart) higher on April 19th post the company’s earnings announcement may have put enough pep in its step for an eventual clearance of the $33 area and a move towards the multi-year resistance around $37.50. From a time-frame point of view, the stock’s vertical leap will likely need a few weeks of digestion here to work off the overbought levels. If the stock then however manages to form a tight pattern, it could eventually lead to a key breakout past $33.
More fundamentally speaking, should Microsoft Corporation (MSFT) be able to move past $33 and thus string together more than a trading pop, it begs the question whether something bigger is afoot in the industry that could again spike margins and volume. Whether that something bigger is a new product or a massive upgrade cycle we will eventually find out. For now, the way the stock trades around the $33 should give us initial clues.