Microsoft Corp. (MSFT) has fallen out of the favored zone in the SIA S&P 100 Index Report, with shares down -8.03% over the past six months. Given the pullback in relative strength, the risk/reward profile for MSFT is now more nuanced. While still positioned in the SIA favored sector of Computer Software and holding a positive SMAX score, the recent decline within the SIA reports could suggest a more cautious outlook and may require further review.
Microsoft Corp. (MSFT) has been declining within the SIA S&P 100 Index Report, having left the favored zone of the report in late August, when it was squeezed out by many of the financial and banking stocks coinciding with the US Federal Reserve lowering interest rates, which provided support to interest-sensitive stocks. While MSFT's movement down the matrix appears to be caused by overcrowding in the exclusive favored zone of 25 names in the report and not necessarily a decline in MSFT shares on an absolute basis, they have fallen by -8.03% in the past 6 months. This decline coincides with MSFT leaving the favored zone. Given this pullback, let’s examine some SIA technical diagnostics on the company’s shares to identify any support or resistance on the chart and measure the risk/reward. For this exercise, the first step is to examine the point-and-figure chart with a 1% sensitivity and the SIA matrix position overlay tool engaged, which illustrates the position MSFT shares have held over time. Here, we can focus on the move from green to yellow and ultimately the red/yellow flip of late, as MSFT currently sits in the 47th position on the SIA S&P 100 Index Report. According to the rules-based methodology of SIA, this action is enough to exclude MSFT from the portfolios. However, for those waiting for a marked improvement, it will be important to watch the $399.39 level for support, which is consistent with the psychological level that traders often respect as a pause level. Beyond this, the levels of $383.80 and $361.56 are notable, but solid support does not materialize until $333–$330, which is highlighted in light green. From a resistance standpoint, the 3-box reversal level is at $436.80, followed by $454.54 and the all-time high of $468.31. MSFT still holds some attractive technical attributes, as it remains in the SIA favored sector of Computer Software, which often sends all its constituents higher during rising tides. Additionally, it still holds a positive SMAX score of 7 out of 10 as a near-term measure against other asset classes, although this number has been deteriorating.
Another way to evaluate MSFT is through a more focused candlestick chart with weekly candles. Here, a clear series of higher highs can be observed from November 2022 onward, except for the latest pullback, which represents the first lower high in several years. This topping formation signals that buyers may not be as committed as before, indicating that the shares could be under distribution. Again, support zones just under $400, $360, and $330 are notable. Also, the recent downtick in volume (see lower red circle) over the past month may be consistent with holiday-level trading but will warrant further observation in the coming weeks. Overall, MSFT presents a mixed technical outlook and may necessitate a review by advisors as near level resistance and lower level support zones may measure poor risk/reward, especially given the lack of SIA relative strength .
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