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Microsoft Corp - (MSFT) - October 26, 2023

On the back of a positive earnings report, Microsoft (MSFT) gained 3.1% yesterday and climbed 4 spots in the SIA S&P 100 Index Report to 12th place. The software giant has been a relative outperformer for much of this year. Since entering the Green Favored Zone on March 14th, Microsoft is up 30.6%, compared with a gain of 6.8% for the S&P 500 Index over the same time frame. Microsoft can be seen not only as an example of the positive side of relative strength analysis, but also as an example of how index gains this year have become increasingly concentrated in a small number of mega-cap, high-weight stocks. While MSFT is up big over the last seven months, the Russell 2000 Small Cap Index (RLS.I), which is featured in today’s edition of the Equity Leaders Weekly, is down 7.2% since March 14th. A significant breakout appears to be underway in Microsoft (MSFT) shares. After rallying through much of the first half of this year, MSFT had been drifting downward through the later part of the summer. About a month ago, the shares successfully retested support near $310.00 and since then, have been bouncing back. Additional support appears possible near the $300.00 round number.

Yesterday, new interest came in on the back of a positive earnings report. The shares gapped up on the open, broke out over $337.50 previous resistance and finished the day above $340.00 on a spike in volume. Initial upside resistance now appears near the $350.00 round number, then the top of the current trading range in the $362.50 to $365.00 zone followed by the $400.00 round number.

Earlier this year, Microsoft (MSFT) broke out of a base, snapped out of a year-long downtrend and rallied to new all-time highs. Since July, the shares have been digesting their previous gains with lower highs and higher lows forming a Symmetrical Consolidation Triangle. Through this rest phase, the shares have been well supported, remaining in the top half of their previous advance and not triggering a pole warning.

Currently Microsoft is on an upswing. A close above $360.00 would complete a bullish pending double top and a pending bullish catapult which would signal the start of a new upleg with next potential resistance near the $400.00 round number, or $447.45 based on a horizontal count. On the other hand, a close below $313.25 would complete a bearish 3-box reversal with support in place near $307.15, a recent breakout point, the $300.00 round number, or $242.20 based on a horizontal count.

With a bullish SMAX score of 8, MSFT is exhibiting strength against the asset classes.

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