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Microsoft Stock Is Verging on a Breakout

Microsoft stock is rallying after news of a big Pentagon contract. Can this stock break out to new highs? Let's look at the chart.

Microsoft  (MSFT) - Get Microsoft Corporation Report on Thursday is helping lead the market higher, up more than 2% on the day.

Given its size -- a $1.8 trillion market cap -- that’s giving a boost to the Nasdaq, although tech in general is doing well.

Helping drive the stock higher is the company’s new contract with the Pentagon.

Specifically, the contract could be worth nearly $22 billion over the next decade and calls for the Redmond, Wash., tech giant to build AR headsets.

The news also comes after a recent report that Microsoft is trying to buy the streaming platform Discord for $10 billion.

Bulls are hoping that the news with the Pentagon will be enough to trigger a breakout in Microsoft. Let’s look at the charts.

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Daily chart of Microsoft stock.

Daily chart of Microsoft stock.

In February, Microsoft gapped down from the $240 level. Since then, the stock has filled that gap, but this area has been resistance over the past month.

While it has hit this level several times since the gap down, it hasn’t been able to close above it.

The stock is set to close above that mark on Thursday, so we could be looking at a potent breakout in this megacap tech stock.

Not only is Microsoft clearing a key level on the charts, it’s also giving the bulls a daily-up, weekly-up and monthly-up rotation by clearing Wednesday’s high, last week’s high and the March high.

That’s one heck of a rotation and gives the bulls some real potential going into April and the second quarter.

Over $240 puts the $246 level in play, with the 52-week high sitting at $246.13. Above that measure puts the long-term two-times range extension in play near $249.

If Microsoft clears $250, then the 161.8% extension is on the table near $256. Eventually, long-term bulls can look for a possible move up to the 261.8% extension near $285.

On the downside, a move below the 50-day moving average should have investors cautious. Below $233 and the stock can move even lower, potentially testing down into the $225 area.