Tuesday, May 04, 2010

Microsoft Corporation (MSFT) Tests Major Support

Above is a daily chart of Microsoft Corporation (MSFT) and as you can see we have several technical factors coming into play. The first things that catches my attention is the potential for a major double top. MSFT traded up to the $31 price level late last December as well as 2 weeks ago and both times the stock failed to hold its ground.

In the lower panel is the MACD indicator which shows a large significat bearish divergence. Many times at turning points the MACD will diverge offering a trading opportunity but there are also just as many false signals which is why we need to combine the MACD indicator with other tools to improve its accuracy.

Right now Microsoft Corporation (MSFT) is testing its 50 day moving average (green line). MSFT is also sitting right on top of  its long-term trendline which  is drawn from the March 2009 low.

Here's how I will play the stock. If I see 2 consecutive closes below the 50 day moving aveage as well as the trendline, I will turn bearish on the stock. This will be the confirmation that I need to see to help confirm the MACD bearish divergence. So by combining simple technical patterns with the MACD divergence, I will hopefully increase my odds of being on the right side of this stock,

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