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Asset Watch

Is Microsoft short of upside?

 

Thursday, June 9, 2022

After Microsoft slashed its fourth-quarter revenue and earnings outlooks due to a strong U.S. dollar, tepid foreign demand for products and currency conversion woes were largely ignored by investors. Likewise, Microsoft’s announcement of a hiring freeze was also taken in stride, as market participants sought a glass-half-full approach to the embattled behemoth.

But is a practical short-selling opportunity on the horizon?

Microsoft remains in a downtrend and has been making lower highs and lower lows since late 2021. If you exclude the rally in late March/early April, Microsoft hasn’t been able to eclipse its 50-day moving average for much of 2022. So with $279.68 the line in the sand (which is only 2.6% above the June 7 close of $272.50) are Microsoft’s days numbered?

If so, the April 2021 highs and the June 2022 lows of roughly $263.32 are next-level support. And if that breaks, the February 2021 highs and the May 2022 lows of roughly $246.77 are next in line. Interestingly, Microsoft has also recorded a “death cross” where its 50-day MA has crossed its 200-day MA from above. Moreover, it’s the first time the ominous pattern has shown a material gap since 2015.

Should we expect a reversal near the 50-day MA? Or is Microsoft poised for a bullish breakout?


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