Must-See Charts: Microsoft Investors Still Waiting on a Dividend Increase

 

NEW YORK (TheStreet) -- Investors expect software giant Microsoft (MSFT) to hike its dividend in the next quarter from the current 31 cents a share. With a dividend yield of 2.7% the stock is an investment favorite for those looking for an income stream.

Microsoft's technical charts show a pending dividend increase is already factored into the price of the stock, which is trading around $45.70 Thursday.

Shares of Microsoft have slipped 1.7% so far in 2015 versus a modest gain of 0.8% for the Dow Jones Industrial Average. Microsoft is also a major component of the Nasdaq Composite, which set an all-time intraday high of 5,164.36 on Wednesday. Microsoft's all-time high is $59.96 set in December 1999.

Here's the daily chart for Microsoft.


Courtesy of MetaStock Xenith

Microsoft has had two major price gaps so far in 2015. After setting a multiyear intraday high of $50.04 on Nov. 14 the stock gapped below its 200-day simple moving average then at $44.36 on Jan. 27 following a negative reaction to earnings released after the close on Jan. 26. This price gap from a close of $47.01 on Jan. 26 to the open of $42.95 was a hit of 8.6%.

Then on April 24 there was a price gap back above the 200-day simple moving average then at $44.91 following a positive reaction to earnings released after the close on April 23. This gap higher from a close of $43.34 on April 23 to the open of $45.66 was a spike of 5.4%.

Microsoft set its 2015 high of $49.54 on April 30 and the stock is currently between its 200-day simple moving average now at $45.50 and its 50-day simple moving average of $46.53.

This type of volatility can occur again following the company's next earnings report scheduled for release on July 28. Another downside price gap will certainly dig into that 2.7% dividend yield.

Here's the weekly chart for Microsoft.


Courtesy of MetaStock Xenith

The weekly chart for Microsoft will shift to negative if the stock ends the week on Friday below its key weekly moving average of $46.03. The projected momentum reading is 55.68 down from a reading of 67.60 on June 19. This would confirm the double top of the highs in November and April as cycle highs with downside risk to the 200-week simple moving average of $35.42 which is the longer-term "reversion to the mean." 

Note that shares of Microsoft had traded back and forth around its 200-day simple moving average since September 2000, following its tech-bubble crash, until the current momentum run-up began in March 2013.

Investors looking to buy Microsoft should place a good till canceled limit order to buy the stock if it drops to $36.01, which is a key level on technical charts until the end of 2015.

Investors not familiar with technical analysis should begin with the notion that a price chart for a stock shows a road map of past price performance, which provides guidance for predicting future share price direction.

Here's how to read a daily chart. There are two moving averages to follow; the 50-day simple moving average is in blue while the 200-day simple moving average is in green.

Here's how to read a weekly chart. This chart shows weekly price bars going back to the beginning of 2007 and thus includes the Crash of 2008, then the current bull market for stocks that began in March 2009. The red line tracks the ups and downs of the key weekly moving average. The green line is the 200-week simple moving average. The red line that oscillates along the bottom of the chart is the momentum reading on a scale of 00.00 to 100.00. A reading below 20.00 is oversold and a reading above 80.00 is overbought.

A technically positive weekly chart occurs when a stock ends a week above its key weekly moving average with the momentum reading rising above 20.00.

A technically negative weekly chart occurs when a stock ends a week below its key weekly moving average with the momentum reading declining below 80.00.

 

 

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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