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So, Is Microsoft A Buy?

03/25/14 04:10:14 PM
by Koos van der Merwe

In August 2013, Steve Ballmer announced that he would resign as CEO of Microsoft, Inc. within 12 months.

Security:   MSFT
Position:   Sell

Steve Ballmer would be succeeded by Satya Nadella on February 4, 2014. Satya Nadella previously led Microsoft's Cloud & Enterprise Division. On the same day, it was announced that John W. Thompson will take on the role of chairman, with Bill Gates stepping down from the position to become more active within the company as Technology Advisor. Then the news came out that Microsoft, Inc. would release Office for the iPad on March 27, 2014. On March 24, 2014 Nokia announced that it has delayed completing the sale of its phone business to Microsoft, Inc. What else is there waiting in the wings that can influence Microsoft's share price?

Figure 1. Daily Omnitrader chart showing share price testing upper external band.
Graphic provided by: Omnitrader.
The chart in Figure 1 is an Omnitrader chart showing that a buy was given on the Vote line on March 11, 2014 when the price was $35.02. On March 21, 2014 the price tested the upper external band at $40.15. Neither of the two indicators, the TDIJak or RSI(14) gave a sell signal, yet the price fell to $39.99. Was this fall,because of the Nokia announcement? Will the Vote line soon trigger a sell signal?

Figure 2. Chart with Elliott Wave count suggesting a WAVE 5 top.
Graphic provided by: AdvancedGET.
The chart in Figure 2 is a daily chart showing an Elliott Wave count. The count suggests that the share price is completing a WAVE 5 with the possibility that the Wave 5 could top out at $45.87. The share price gave a JM Internal Band buy signal on January 24, 2014 when the share price was $36.92. The JM Internal Band indicator is a 15-period simple moving average offset by 2% positive and 2% negative.

I would not be a buyer of MSFT at present levels, but would wait for a correction before placing a buy order. With the change in management, you can expect a number of innovations that are likely to push the price higher. It's a company that should be watched.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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