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A Look At Microsoft

06/14/17 03:36:48 PM
by Koos van der Merwe

On April 4th, 1975, Microsoft was founded by Bill Gates and Paul Allen in Albuquerque to develop a wide range of products for computers.

Security:   MSFT
Position:   Accumulate

Microsoft rose to dominate the personal computer operating system with MS-DOS in the mid-1980s. In the year 2000, Bill Gates handed over the CEO position to Steve Ballmer. On February 4th, 2014, Steve Ballmer retired as CEO, and was succeeded by Satya Nadella, an Indian American business executive. Before becoming CEO of Microsoft, Satya Nadella was Executive Vice President of Microsoft's cloud and enterprise group. He was responsible for building and running the company's computing platforms, developer tools and cloud computing services.

Figure 1. Monthly chart with Elliott wave count.
Graphic provided by: AdvancedGET.
The chart in Figure 1 is a monthly chart of Microsoft showing how the share price trended sideways during the years that Steve Ballmer was CEO. With the takeover by Satya Nadella, on February 4th, 2014, the share price started to move up strongly, and is today trading at $71.76. The Elliott wave count on the chart is suggesting that the share price is testing a WAVE 5 and with the RSI indicator at overbought levels, could start correcting. Do note that volume fell as the share price rose, suggesting weakness.

Figure 2. Weekly chart showing movement of the share price since Satya Nadella became CEO.
Graphic provided by: AdvancedGET.
The chart in Figure 2 is a weekly chart showing how the share price started to climb with Steve Ballmer's announcement that he would step down as CEO of Microsoft within 12 months. The chart suggests that this was the low of WAVE 2 of an Elliott wave count. The chart also shows that when Satya Nadella took over on February 4th, 2014, the Elliott wave count was a Wave 2 of WAVE 3. Since then the share price has risen strongly to its present price of $71.76.

Figure 3. Daily chart with JM Internal Band.
Graphic provided by: AdvancedGET.
The daily chart in Figure 3 shows that a JM Internal Band buy signal was given on November 17th, 2016, when the price was $60.85. Since then the share price has remained in a JM Internal Band buy position. The JM Internal Band is a 15-period simple moving average offset by 2% positive and 2% negative. A move above the upper band suggests a buy and below the lower band a sell. The RSI indicator is suggesting that a divergent sell could occur in the near future. Volume has risen as the share price rose suggesting strength.

Figure 4. Omnitrader chart with buy/sell signals.
Graphic provided by: Omnitrader.
The chart in Figure 4 is an Omnitrader daily chart that shows a buy signal given on May 25th by the Vote line, based on the Aroon and JM Strategies. The Omnitrader charts serve short term traders.

Based on the Omnitrader chart, I would not be a buyer of Microsoft at present levels, but would wait for a correction — a sell signal given followed by a new buy signal on the Vote line. Things are happening in the company under Satya Nadella's leadership, so it remains a company definitely on my watch list.

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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