Stock of the day: Microsoft
22 August 2024
In today's stock of the day, we're noticing several bearish setups as the market enters a correction phase. Let's focus on Microsoft, where the current correction is unfolding at a technically significant level. The green uptrend line, which has been intact since January 2023, was broken in early August. After this break, the price found temporary support at the yellow horizontal level, but the recent bounce off this line is now facing resistance as it retests the broken uptrend line from below.
This bounce from the underside of the uptrend line is quite telling. The price is clearly reacting to this resistance, and the next target appears to be the yellow horizontal support. This movement is forming what looks like a head and shoulders pattern, with the current price action completing the right shoulder. If the price breaks below the yellow horizontal support, it would confirm the head and shoulders pattern, offering a strong sell signal. We’ll need to watch closely to see if this bearish scenario plays out.