Microsoft Is Set Up Well for a New Bull Run
Shares of Microsoft (MSFT) - Get Report closed Friday at new July highs as the stock extended its post-Brexit rebound. This impressive move has erased all of the late-June loses and has pushed the stock to a breakout level.
In the near term, Microsoft investors should take a much more positive view of the action. The stock appears to be on the verge of a powerful rally leg.
During the two-day Brexit flush, Microsoft was driven down to a major support zone on very heavy volume. The stock held this key area on Monday, June 28, which includes the stock's initial 2016 low, before quickly recovering. Since that Monday low, Microsoft has gained ground during seven of the next eight sessions. During this phase, the stock has retaken its 50- and 200-day moving averages and has left behind very solid nearby support. This is a solid foundation for a significant move higher.
In the near term, Microsoft bulls should consider the stock a low-risk buy between $51.75 and $50.50. This key zone includes the initial July high as well as last week's low. A close back below $50 would indicate that more basing and consolidation will be needed before a rally can take hold.
On the upside, once past the May peak, the stock will have a clear path to fill the huge earnings inspired downside gap left behind back on April 22. This level, just below $55.50, is a logical target and will likely provide significant resistance.
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Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long MSFT.