MSFT shares could be in for a long-term reversal since a double top pattern just formed on its daily time frame. Price has yet to break below the neckline at the $40-40.50/share level before confirming the potential selloff. If the downtrend is confirmed, price could fall until the next support at the $30/share level.
Stochastic is pointing down, indicating that there’s enough selling momentum present to trigger a break from the neckline support. RSI is also moving lower but is already near the oversold area and might turn higher to draw buyers in.
The 100 SMA has recently crossed below the longer-term 200 SMA, suggesting that further losses are possible. However, the moving averages seem to be treading sideways for now, reflecting indecision.
MSFT Shares Outlook
US equities are still looking weak, following a few days of consecutive declines that started from the downturn in the Chinese stock market. The government and central bank have made several efforts to stem the decline but it looks like the impact has already spilled over to the global financial market.
In the US, majority of tech stocks have been in the red due to these ongoing declines. The recent yuan devaluation by the central bank would render US products more imported in China, which would then dampen demand and revenues later on.
At the same time, doubts on the Fed’s interest rate hike time line are also weighing on overall sentiment in the US financial market. The Fed has pointed out that weak inflation could lead them to delay the liftoff, and the recent equity market action could be another reason for them to hold back their potential tightening, indicating that the US economy isn’t on such a stable footing just yet.
Nonetheless, a recovery in the tech sector and among US equities could still keep MSFT shares above the neckline support and trigger a bounce back to the previous highs at $50/share.
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