Microsoft is set to release its earnings report in today’s US trading session, and MSFT shares are currently trading around the middle of its long-term range. Stronger than expected numbers could lead to a rally to the top at $49/share while weak data could spur a selloff to the bottom near $40-42/share.
Stochastic is indicating overbought conditions, which means that buyers are already exhausted and that a selloff might take place. RSI is still on the move up, hinting that there’s enough buying momentum left for more gains.
The 100 SMA is below the longer-term 200 SMA, also suggesting that the path of least resistance is to the downside. A move towards the bottom of the range would complete a double top pattern on the daily chart, signaling that a long-term downtrend is bound to happen.
MSFT Shares Outlook
Stock analysts are projecting a loss of 30 cents per share for MSFT shares, as the company could show a drop in profits for the quarter. The bottomline was probably dragged down by write-downs and restructuring in the company.
Meanwhile, Microsoft’s sales are expected to fall about 6% from a year ago to $22.06 billion, according to Thomson Reuters estimates, because sales of Windows software and Office software licenses continues to decline along with PC sales.
In addition, the company could discuss a potential mobile reboot, as the share of Windows smartphones is gradually dwindling. With its $7.6 billion accounting charge and more employee layoffs in the mobile business, Microsoft could disclose new strategies to boost Windows smartphones which have a meager 3% market share.
Longer-term declines for MSFT shares could take prices down to $32-34/share if the stock breaks below the double top neckline around $40/share. On the other hand, if this area holds as support and Microsoft’s strategy proves profitable, MSFT shares could still recover to the middle of the range or to the top eventually.
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