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Microsoft buyers defending 42.00

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Microsoft (NASDAQ:MSFT) shares dropped to $42.00 from $47.57 and is now looks more bearish on the daily chart, following the aggressive sell-off took place few days ago. The stock closed at $42.70 a share yesterday, which translates to a market cap of around $365 billion. Following that selling pressure, the stock is now finding support at the key support level of $42.00, which includes the ascending trend line. Going forward the longer term picture is continuing to look bullish since the price remains above the ascending trend line as well as above the 200-period SMA on the daily chart. In addition, the 50-period SMA remains above the 200-period SMA, keeping the outlook of the stock positive.

With the above in mind, if the bulls manage to maintain the price above the $41.20 – $42.00 zone, which includes the 200-period SMA, as well as the ascending trend line, we could see the stock pare some of its losses, prompting a more aggressive move back towards the $45.70 areas, which includes the 50-period SMA. However, a push above $48.00, would indicate a continuation of the uptrend and thus invalidate any bearish outlook. For confirmation of the trend reversal, we will need to see a break below the aforementioned obstacles and the $41.00 level, prompting a move lower towards the $38.60 – $39.00 zone.

Our medium-term studies provide mixed signals. The stochastic indicator signals that the stock is oversold and the downside bias has lost momentum, while the MACD remains in a bearish territory and below its trigger line supporting the bearish outlook.

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