Microsoft Is Feeling the Weight of Higher Rates

Larry’s Note: Tonight, I’ll be sharing a very important opportunity with traders at my “Money Shock Calendar” event…

On 32 occasions this year, the federal government will send volatility shooting up as much as 20X. This happens because everyone is trying to guess where inflation… interest rates… and the overall economy is headed. And on these days, we get important clues…

I’d like to share a calendar with each of these dates marked… and explain how we can use these volatility “shocks” to profit faster and bigger from our trades.

So please go right here to RSVP to tonight’s event automatically and learn how to download these dates directly to your calendar.

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Tech giant Microsoft (MSFT) benefited enormously from the Fed’s era of cheap money.

From its March 2020 lows to its November 2021 peak, MSFT’s stock price rallied an incredible 163%…

And its market cap swelled by a massive $1.55 trillion (up from $1.03 trillion to $2.58 trillion).

However, even a company of its size and reach wasn’t immune to the dramatic selling in Big Tech last year…

By the time it bottomed out in November, MSFT had dropped 37% for the year. After that, MSFT enjoyed a temporary bounce that petered out in December.

Then, having made a higher low, it rallied to six-month highs.

But now MSFT’s rally recently peaked and is reversing. So today we’ll see what’s coming next…

Both Patterns Reversed

MSFT’s chart below shows a classic downtrend in action.

MSFT made lower highs in late March (‘A’) and mid-August (‘B’) – and prior to that in December 2021.

The longer-term 50-day moving average (MA – blue line) also steadily trended down…

Microsoft (MSFT)

Source: eSignal

And apart from the counter-rallies to ‘A’ and ‘B,’ the Relative Strength Index (RSI) bearishly remained in the lower half of its range (below the green line).

The counter-rally that began in November up to MSFT’s high in December, coincided with two bullish technical signals…

1. The 10-day MA (red line) broke back above the 50-day MA.

2. The RSI broke up through resistance and tracked in the upper half of its range.

However, as the chart shows, MSFT was unable to sustain its buying momentum… With both patterns reversing, MSFT rolled over and fell before establishing a higher low.

This higher low coincided with the RSI forming a ‘V’ and rallying from near oversold territory (lower grey dashed line).

As the chart shows, MSFT’s rally initially stalled as it ran up into resistance.

Take another look…

Microsoft (MSFT)

Source: eSignal

However, as the RSI then broke into its upper range, the 10-day MA again broke above the 50-day MA. And MSFT rallied to its highest level since August last year.

This time, though, it was a common reversal pattern that saw MSFT roll over and head lower from its February high…

As you can see, MSFT was making higher highs (upper orange line) while the RSI was diverging lower (lower orange line).

With the RSI then reversing lower from overbought territory (upper grey dashed line), MSFT rolled over and headed down.

So now, with the RSI tracking right back along support (red circle), what can we expect from here?

Testing Its Recent Low

For MSFT’s recent rally to regain momentum, we’ll need to see the RSI hold support and remain in the upper half of its range.

The longer it can hold in its upper range, the bigger any further rally should be.

The other indicators I’m watching are our two MAs… For MSFT’s rally to resume, we’ll also want to see the 10-day MA accelerate above the 50-day MA.

However, right now, it all hinges on the RSI…

With MSFT having already reversed sharply off its February highs, the RSI breaking below support will add further momentum to its fall.

If the 10-day MA falls below the 50-day MA, we could then see MSFT test its January 5 low.

Regards,

Larry Benedict
Editor, Trading With Larry Benedict

Reader Mailbag

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Thank you for your guidance in creating my first and quite profitable trade with your Opportunistic Trader service.

I bought two QQQ puts on Thursday and sold them on Friday for a profit of $317, or 32%! Not bad for a one-day trade. Looking forward to trading on your next signal.

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