Even though Microsoft (MSFT - Get Report) has gotten hit hard in the last year -- stumbling into the red by more than 8% to underperform the S&P by close to 20% -- it's signaling that lower ground isn't out of the question.
Microsoft has been consolidating since mid-November, moving sideways in a rectangle pattern after getting sold off hard from highs of $33 this year. Consolidations are generally good things because they give buyers and sellers a chance to sit back and consider their next moves without the added pressure of a moving target (remember, all price action ultimately comes down to buyers and sellers). But rectangles tend to be continuation patterns, so a breakdown below support at $26.50 is a signal that shares are on their next bear leg.
Listening to price action is critical in this case. After all, if shares can push through resistance, it's more likely that MSFT has found a bottom.A downtrend in relative strength (not to be confused with RSI) adds some extra evidence towards a downward ending in this stock. Microsoft continues to underperform the S&P 500 at an increasing rate, and that's historically a good indicator that more underperformance is yet to come for the next three to ten months.