Chart of the week – Microsoft
Microsoft at key support after steep sell-off (medium-term technical analysis)
Source: CMC Markets
- Since its all time of 349.66 printed on 22 November 2021, Microsoft has undergone a steep decline of -15.4% to hit a low of 295.68 on Friday, 21 January which is also a three-month low ahead of its Q4 earnings results release on Tuesday, 25 January after the US market closes.
- The current price action of Microsoft after its last Friday’s sell-off has led it to hover above a key support of 292.30 which is defined by a confluence of elements; the lower boundary of the major ascending channel in place since 30 October 2020 low, the 200-day moving average, the 38.2% Fibonacci retracement of the major impulsive up move sequence from 30 October 2020 low to 22 November 2021 all-time high and the 1.618 Fibonacci expansion of the recent down move from 22 November 2021 high to 3 December 2021 low projected from 29 December 2021 high.
- The daily RSI oscillator has reached an oversold level of 29.6%, its lowest level since 24 December 2018 which suggests that the recent downside momentum is overstretched; and a capitulation in price action may occur to kickstart a potential rebound/recovery process.
- If the 292.30 key medium-term pivotal support holds, Microsoft may see a rebound to retest the 319.90 intermediate resistance and a break above it may see a further potential up move towards 343.80 next (the recent range top of 13 December 2021 to 29 December 2021).
- However, a daily close below 292.30 invalidates the recovery scenario for an extension of the steep decline towards the next support at 274.90/266.70.
