2012 has been a pretty mediocre year to own Microsoft (MSFT). Even though the technology giant has climbed 4.24% so far this year, that performance is awful compared to the nearly 14% climb the rest of the S&P 500 saw over that same period. But Microsoft's chart indicates that could change...
For the last few weeks, Microsoft's price has been consolidating sideways in a rounding bottom pattern. A rounding bottom looks exactly like its name suggests: it's a U-shaped curve that connects the swing lows for a stock. A horizontal resistance level that connects the highs is our breakout level to watch -- in MSFT's case, it comes in at $27.75. That means that a break above that $27.75 level is the buy signal for this stock right now.
The fact that a move above $27.75 would coincide with a break of the downtrend that's been holding shares lower since September is important -- it magnifies the upside potential for shares by removing another important upside barrier. Momentum adds some extra confidence to this trade -- 14-day RSI has been trending higher since the bottoming started. Since momentum is a leading indicator of price, that's a good sign that MSFT is likely to test $27.75 this week...
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV