Conclusion, Investment Implications, Strategy

Microsoft (MSFT) is resuming its 2016 major uptrend following a successful late March test of major underlying support.  A sustained rise above this support, currently near $149.57, would target an additional 16% rise to $198.00 per share.  MSFT has maintained a significant and stable 30-year positive correlation to the S&P 500 (SPX). This is an Asbury Momentum idea.

Analysis and Rationale

Microsoft Corporation (MSFT) develops, licenses, and supports software, services, devices, and solutions worldwide. The company’s Productivity and Business Processes segment offers Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, and Skype for Business, as well as related Client Access Licenses (CAL); and Skype, Outlook.com, and OneDrive. It sells its products through distributors and resellers; and directly through digital marketplaces, online stores, and retail stores. It has strategic partnerships with Humana Inc., Nokia, and Telkomsel. The company was founded in 1975 and is headquartered in Redmond, Washington.

Chart 1 below plots MSFT daily since Q4 2019 along with its 200-day moving average, a widely-watched major trend proxy.  The green highlights show that the stock made a successful test of its 200-day MA in late March, and that the recovery from that test developed into a chart pattern, inverse head and shoulders.  The pattern targets an additional 16% rise to $198.00 per share that will remain valid as long as the 200-day MA, currently at $149.57, now loosely holds as underlying support.

Chart 1

MSFT has maintained a statistically significant and stable 30-year positive correlation to the S&P 500, which most recently has been 0.89 over the past 6 months.  Per the correlation, we  view this emerging breakout in MSFT as also being indirectly positive for the US broad market.

Table 1 below shows that, considering the aforementioned upside target and a protective stop placed below the $162.30 area, a long entry price of $170.39 would provide a 1:3.4 risk/reward ratio (risking $1.00 to make $3.40) with an initial risk of 4.7%.

Table 1

Please consult the table showing our Asbury 6 key market metrics to help determine if this investment is suitable for you in light of current market conditions.