As interest rates continue to press higher, the Dow and S&P 500 have ignored this rise lately. However, tech stocks and the Nasdaq haven't, with many high-growth holdings suffering from a punishing decline.
While FAANG and Microsoft have largely sidestepped that selling pressure, they’re not exactly bragging either.
The Nasdaq suffered a 12.5% peak-to-trough decline so far this quarter, more than double the S&P 500’s maximum decline of 5.75%.
For Microsoft, the stock sits somewhere in the middle. At the deepest point of its decline, shares fell 8.9%. However, while the stock has been avoiding a disastrous correction, it’s struggling for upside traction. Let’s take a closer look at charts.
Compared to some of its other mega-cap peers — mainly, Apple and Amazon (AMZN) - Get Report - Microsoft has actually held up pretty well. However, like these other two names, the stock topped out in early September.
Shares have been mostly consolidating since, although there’s been a slight favor for the bulls.
Notice the way the stock traded in respect to the long-term 161.8% extension. For months this mark was resistance, with the stock failing to hold over it in the third and fourth quarter. However, in 2021 Microsoft broke out over this level.
More importantly, it held this level as support at the peak of selling pressure in tech, which came earlier this month.
Pressing higher by 2.5% on Monday, Microsoft could have some potential here. Specifically, shares are reclaiming the 10-day, 21-day and 50-day moving averages with today’s rally.
Now let’s see if it can get a move back up to $240. This level was resistance last week after acting as support last month. If it can rotate over this level, then the $245 to $246 area is back in play, where Microsoft most recently topped out.
Above that zone puts the two-times range extension in play, followed by the shorter-term 161.8% extension up near $255.
That type of move could potentially kickstart a long-term rally up toward $285.
On the downside, a move back below the 50-day moving average puts the longer-term 161.8% extension back in play, along with the 100-day moving average and the March low.