Microsoft ( MSFT) is another name that's spent much of the last year consolidating, in this case through a rounding bottom pattern. The rounding bottom looks a lot like it sounds; it's formed by a horizontal resistance level to the upside and curved support below that. The setup indicates a gradual shift in control from sellers to buyers, a fact that should be music to the ears of anyone who owns MSFT right now.
The resistance level to watch now is at $36. A move through that price ceiling is the signal that buyers are in control of shares, and upside is a high-probability trade. Typically, rounding bottoms come into play at the bottom of a stock's recent price action, not the top (as in MSFT's case). But while this setup isn't textbook, the trading implications are every bit as bullish here.Relative strength (not to be confused with RSI at the top of the chart) looks strong in MSFT right now. Statistically speaking, that's good sign that this stock is likely to continue to outperform for the next eight to 10 months. When the $36 breakout happens, I'd be a buyer -- and we're very close right now.
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