NEW YORK (TheStreet) -- While Apple's (AAPL) stock grew hugely from 2003 to 2011, Microsoft (MSFT) continued to bumble its way through a mire of missed reinvention opportunities, bad CEO decisions, attempts to derail the dominance of Google (GOOG), Amazon (AMZN) and Apple, and acquisitions that either made no sense or that were put on a shelf and forgotten.
Can Microsoft learn from this story and reinvent itself? Let's consider the technicals and the fundamentals of the question.
In 2003, when the majority of market participants had given up on Apple as it spiraled toward bankruptcy, Steve Jobs returned as CEO. The rest is history.
While Apple made many investors millionaires over a decade of amazing growth in new mobile devices for consumers and businesses, Microsoft stock values settled into a long-term trading range approximately 20 points wide, well below its all-time high. Apple was the dream stock to own, while Microsoft was truly a dog of the Dow (INDU).
Now with a new CEO, Satya Nadella, Microsoft may take off. Its stock has risen up out of the prior trading range highs. Many market participants are predicting it will have strong growth with a new leader.
What will it take for Microsoft to really seize the opportunities present at this time? What can Nadella learn from Jobs' example? These are the questions investors and traders must ask as Microsoft stock sets up technically to break out to new highs.
But Microsoft is not guaranteed growth just because its new CEO is focusing on cloud technology.
The cloud computing revolution has been underway for many years now. Already Amazon has seized market dominance in Platform as a Service cloud technology, with Google a close second. Microsoft has been a contender in PaaS, but is a distant third place runner-up and is not likely to dethrone either Amazon or Google any time soon. Once market dominance is firmly established by a company, it is nearly impossible to seize that dominance away from the No. 1 company, as we've seen in prior technology booms.
In order to dominate a key area of the cloud, Microsoft must reinvent, much like Steve Jobs did. The company needs to reimagine a product that is already popular but needs a totally innovative new approach. What this will require is something investors and consumers have not seen from Microsoft in over a decade.
Nadella needs more than focus. He needs inspired new technology.
Luckily, technicals lead fundamentals.
If Microsoft is able to create something that the buy-side institutional investors are excited about, we'll see it in the stock's charts. For technical investors and traders, a critical technical factor for considering investment in Microsoft is a price that is sustained above the prior highs of the trading range at $42. If the breakout doesn't sustain, then the stock price will drop back into its range, continuing sideways.
A breakout would require significantly more volume than is present at this time, along with large-lot indicators confirming. This would be a position style to long-term entry. Position-style trades are held for several days to several months.
This technical pattern entry is what I call a compressing-platform breakout for buying into strength. Support from the platform is moderate for a position-style trade at the highs of the range. Long-term support is at the lows of the range and is moderate. Moderate support is used for strongly uptrending markets and is not suitable for holding during an intermediate-term correction or bear market.
The next technical resistance level is $53, which is also a fundamental yearly resistance level.
Institutional ownership of the stock is currently at 74%, which has been increasing slightly month-over-month this year according to TC2000 charting data from Morningstar.com. Note: Dow components have an average of 71% institutional ownership. The largest institutional owner is Vanguard, which is a giant buy-side institution, with 379,853,558 shares held as of March 31, 2014. Vanguard increased its holdings in the first quarter of 2014 by 2%. Microsoft's stock would do well if this trend continues.
For now, short-term technical patterns show that smaller funds and smaller lots control the stock price.
See more from Martha Stokes, CMT, at TechniTrader.com.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
All statements are the opinions of Martha Stokes CMT and are not to be construed as anything more than opinions. Martha Stokes CMT is not a broker or an investment advisor; she strictly provides an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. Examples presented are for educational purposes only.