Microsoft Stock Breaks Out Toward Top of Channel – Investopedia

Microsoft Corporation (MSFT) shares initially moved lower in the aftermath of its third quarter financial results, but they recovered on Friday following new guidance and analyst upgrades. Revenue rose 15.6% to $26.82 billion – beating consensus estimates by $1.05 billion – while earnings per share of 95 cents beat consensus estimates by 10 cents per share. The strongest growth came from server and cloud services, which grew 20%.

On its conference call, the company provided fourth quarter revenue guidance of $28.8 billion to $29.5 billion, which was higher than the $28.08 billion consensus estimate. JPMorgan analysts upgraded the stock from Neutral to Overweight and increased their price target to $110 per share, which represents a significant premium to the current market price. Additional analysts could weigh in on the results next week and provide potential catalysts for traders. (For more, see: Microsoft Jumps After Earnings Beat.)

Technical chart showing the performance of Microsoft Corporation (MSFT) stock

From a technical standpoint, Microsoft stock rebounded from the 50-day moving average at $93.06 to break out from R1 resistance at $96.65 and prior highs, but it remains within its price channel dating back to December of last year. The relative strength index (RSI) appears neutral with a reading of 56.82, but the moving average convergence divergence (MACD) continues to trend higher past the zero line, suggesting potential for a further rebound ahead.

[Learn to develop a trading strategy using supplemental indicators like the RSI and the MACD in Chapter 4 of the Technical Analysis course on the Investopedia Academy]

Traders should watch for a breakout from the upper end of its price channel at around $100.00 to R2 resistance at $102.02 or a breakdown to retest support at the 50-day moving average or pivot point at $91.86. Despite the positive financial results, traders should tread carefully moving into next week given that Friday’s black candlestick shows a close below the highs of the day. That said, the intermediate trend remains bullish. (For additional reading, check out: Microsoft: 7 Secrets You Didn’t Know.)

Chart courtesy of The author holds no position in the stock(s) mentioned except through passively managed index funds.

Source link