If you’re wondering why the major benchmarks like the S&P 500 and Nasdaq are going lower, look no further than the chart of MSFT. The oversized weighting of a mega cap stock like Microsoft has an outsized influence on our growth-oriented benchmarks!
It is highly unlikely that the S&P could mount any meaningful upside move while a mega cap technology stock like Microsoft is making consistent new lows. So while certain areas of the market such as energy, solar and restaurants can certainly demonstrate positive technical characteristics, they are just not large enough to move the needle for the equity benchmarks.
Is there a light at the end of the tunnel? I would say yes, but as a short-term trade as opposed to a broader advance.
On Thursday of this week, many stocks including MSFT and AAPL are forming what’s called a bullish engulfing pattern. This is a two-bar candle pattern where the second day’s range “engulfs” the first day’s range. A pattern like this suggests a short-term reversal in sentiment from bearish to bullish.
Assuming a strong close on Thursday, MSFT is not displaying an ideal bullish engulfing pattern, mainly because the first day is more of a doji candle where the open and close are at the same level. But Thursday does appear to be a bullish outside day, with an expanding range and strong close.
In today’s video, we’ll review the chart of MSFT, discuss its impact in the XLK and QQQ, and identify a potential downside target for this important stock using the best practices of technical analysis.
- What should investors know about the top-heavy weightings in ETFs like the XLK and QQQ?
- What levels are important for Microsoft as we enter the seasonally strongest part of the year?
How can we differentiate a short-term sentiment shift from the long-term trend on a chart like MSFT?
For deeper dives into market awareness, investor psychology and routines, check out my YouTube channel!
(VIDEO) Microsoft Stock $MSFT
Twitter: @DKellerCMT
The author may have positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
