MSFT Microsoft Weekly Chart Overbot Rising Wedges Negative Divergence Price Extended

Traders are tripping over each other to buy MSFT and AAPL stock regardless of price sending the stocks to new record highs. The stock market is moving higher with less leadership and Apple and Mr Softy are two of the leaders. You would rather see broad-based participation including small caps to sustain a stock market rally. Price is extended above the moving averages requiring a mean reversion (sell off). The indicators are at or coming off overbot levels. The red lines show negative divergence across all indicators. The move over the last three weeks is not negatively diverged since price has not made a higher high than the November high. If price makes another high and the indicators do not print another high that negative divergence will seal the fate for lower prices.

However, price does not have to move any higher; it is already very overextended. If you study the maroon lines for the indicators you will see that the neggie d spankdown in late October-early November was the real deal. Every indicator, the RSI, MACD line, histogram, stochastics and money flow are all neggie d. It's cooked; stick a fork in it. There is no reason for price to come back up for a higher high again since the indicators universally agree that lower is the path ahead.

Keystone's 80/20 rule says 8's lead to 2's so the print above 48 hints that 52 is in play. The 48.80 level will want to lead to 49.20 and 49.80 will want to lead to 50.20. However, as mentioned, due to the universal neggie d, down would be favored more than up going forward. Watch the MACD line cross as an important indicator going forward. The bulls are favored but if the MACD cross turns negative, the top is likely in for Microsoft. If you enjoyed the upside it is likely prudent to scale out moving forward. A drop under 48 may usher in quick aggressive selling so be ready for that.

The daily chart is staggering sideways. Interestingly, the MSFT monthly chart continues to show long and strong profiles for RSI and MACD line. Thus, mixing it all together and sprinkling magic voodoo dust on it all, the projection would be for a pull back now into early 2015, but MSFT wants to come up for another look after a few weeks of selling, perhaps in February-ish, and at that time the multi-year top should print for Microsoft. A move down to the 40-45 area would not be surprising for MSFT in the near term into January but a sharp move back up will likely result in January-February and that would be the last hurrah. The charts can be reassessed in a couple weeks or so. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.