The stock is now just below flat for the session, despite receiving a new Wall Street-high price target from the analyst community.
Microsoft stock - and the other stock in the $1 trillion market cap club, Apple (AAPL) - Get Apple Inc. (AAPL) Report -- remain red hot. Both made new highs on Monday and have made that feat somewhat routine over the past month. For Microsoft specifically, the stock has rallied about 53% on the year.
That’s why some investors may be surprised to see that MSFT stock is not making new highs on Tuesday after Wedbush analysts raised their price target to $185 from $170.
The target implies roughly 20% upside from current levels, which if achieved, would give Microsoft a market cap of about $1.44 trillion. Let’s take a closer look at the charts to see if this feat is even possible.
Trading Microsoft Stock
Above is a daily chart of Microsoft stock, and a beautiful one at that.
The stock erupted from its fourth-quarter slump, rallying from about $100 at the end of 2018 to $140 in July. Admittedly, almost every stock came into 2019 under suffocating pressure as the market was decimated. Still, the rally was impressive in many investors' eyes.
However, after a 40% rally into summer, Microsoft stock found itself in the doldrums. Shares continued to grind higher, putting in higher low after higher low, all while failing to break out over $140. This went on for three to four months, before the stock finally gapped higher in late-October.
It’s been off to the races since, while investors face the inevitable question of what now.
I am a bit surprised that Microsoft is not higher after such a bullish analyst call. But with shares flirting with an overbought condition as it is, it’s healthiest that we see MSFT stock cool off a bit.
Remember, when stocks are too hot it can lead to volatile moves in both directions. Slow and steady is the preference here.
A dip down to channel support (blue line) and/or the 20-day moving average would be a healthy buy-the-dip zone for active bulls. Below this area and the 50-day moving average is on the table, although it hasn’t been the strongest level of support in 2019.
I’m not sure what would trigger such a correction, but should Microsoft stock fall to $140, this is a vital level of support that bulls need to see hold.
On the upside, a move over the current high at $155.90 could trigger a larger rally up to $160.
That’s the setup, for now. Buy the dip into support or look for a breakout over $155.90. Wedbush’s $185 target may be possible in 2020, but we still have a while before it’s in play.