Microsoft shares have been trending higher, creating a rising wedge formation on its 1-hour time frame. Price is testing the resistance around $55/share and might be due for a test of support above $54/share.
Stochastic is indicating overbought conditions so it makes sense for profit-taking to take it down to the wedge support near the 100 SMA. This short-term moving average is above the longer-term 200 SMA so the path of least resistance is still to the upside.
RSI is also pointing down so Microsoft shares could follow suit. If bearish momentum picks up, a downside break of support could spur a selloff to the wedge lows at $48/share, although this scenario seems unlikely.
Risk appetite spurred by the FOMC’s decision to keep rates unchanged and Fed head Yellen’s cautious rhetoric has allowed US equities to advance in anticipation of low borrowing costs, which would ensure cheap credit for consumers and businesses.
In company news, Microsoft shares are currently supported by positive developments in virtual reality and in the cloud. The company continues to form solid partnerships with IT enterprises with these offerings, increasing its market share and potential revenue sources.
The firm’s annual developer conference, Build, is underway so new products could be launched then. Other potential market catalysts include the release of the Chinese PMI and US NFP, both of which might have a significant impact on overall market sentiment and investors’ appetite for risk.
Stronger than expected Chinese PMI readings could buoy Microsoft shares while weak results could lead to some losses. Meanwhile, stronger than expected US jobs data could reinforce tightening talks and force shares to retreat while weak readings could confirm that cheap credit would be available for much longer.
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