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Microsoft Trend Change

02/17/04 11:52:51 AM
by Gary Grosschadl

Microsoft slid under its 200-day moving average on higher than average volume. That should send alarm bells ringing.

Security:   MSFT (Nasdaq)
Position:   Sell

This daily chart shows two earlier warning signs prior to Microsoft's dip under its 200-day moving average. The first was a move under the gap line in February. This line marks previous resistance turned support and also can be viewed as the troughline of a skewed double top formation. The next warning came via a move below the pitchfork or Andrews Line days later. The bullish pointing pitchfork, once broken to the downside, indicates a change in trend. A surprise move back inside the pitchfork seems unlikely as too much time has passed and the last trading session ended on a rather sour note.

Two possible downside targets are shown. The first at $26 represents a measured downside move equal to the distance between the previous top at the dashed line and the troughline. The lower $24.80 target would be a test of the former low.

A move below the pitchfork suggests a change in trend on this daily chart for MSFT.
Graphic provided by:
The displayed indicators are all in bearish mode. The DMI or directional movement index shows a bearish set-up with -DI above +DI and the ADX line above 25, suggesting growing trend strength for the bears. The MACD (moving average convergence/divergence) shows a bearish move below the zero line similar to the RSI (relative strength index) weakening below its 50 level. The stochastic indicator, although in oversold territory, has yet to show a move above the 20 level so there is no sign of any bullish reversal.

The outlook is bearish for Microsoft and if it does pull off a surprise reversal attempt, it has three upside tests to overcome: the 200-day moving average, the lower median line (pitchfork), and the previous gap line.

Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

E-mail address:

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Date: 02/17/04Rank: 5Comment: 
Date: 02/17/04Rank: 5Comment: Yes, I ll say! Not a good sign at all from a company with over $50 billion in cash. Cheers! Matt Blackman

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