Is MSFT's bullish momentum depleted?
Updated
The uptrend channel
- A 100% parallel extension of the uptrend channel indicates the strength of this bullish trend.
Symmetrical projection: An uptrend N pattern
- By projecting a 100% symmetry projection of the initial swing from point A to B, and extending it from point C, the target price would be point D at $303.3.
- Given that the anticipated symmetric pullback to point E did not occur, my expectation is for a further 100% extension from point D. As a result, the target price has been revised upwards to point F at $360.8.
Other key levels
Resistance
- The historical highest high at $349.6 is a very strong resistance level, coinciding with the upper band of the channel's 100% extension. The more resistances encountered, the harder it is to break through.
Support
- The 1.5 extension level at $ 332 is a support level that has been tested. Clear price reactions to key Fibonacci levels can enhance the overall significance and value of the analysis.
- The prior low level, which is at $322.5, can always act as a significant support level. Moreover, it’s a resistance turned support level, making it more important.
Possible scenarios
If the uptrend continues…
- When facing the key resistance at $349.6, the market should exhibit a clear movement, like a gap-up opening or a significant bullish candle, to demonstrate its determination.
If the bullish momentum is depleted…
- The market is likely to pull back the price to below the prior low level, which is at $322.5.
- Compared to the 1.5 extension support level, the level of the prior low holds greater importance. If the 1.5 extension support level is breached, it serves as a mere warning. However, If the level of the prior low is breached, it disrupts the rhythm of a healthy bullish trend and makes price movements difficult to anticipate.
Conclusion
- If the key support at $322.5 is breached, it’s better to step out of the market. Allow the market to stabilize on its own, and wait for a clearer signal before reentering.
- If not, the uptrend will continue, and the target price remains at $360.8.
Hindsight bias part
- While our target price is $360.8, the prior historical high level at $349.6 represents the optimal target price. Considering the formidable resistance at the prior historical high, I prefer to sacrifice a small portion of potential returns in favor of a higher probability of success.
**Not Financial Advice**
The information contained in this article is not intended as, and should not be understood as financial advice. You should take independent financial advice from a professional who is aware of the facts and circumstances of your individual situation.
Note
The price has successfully reached the target price of $360.8, accompanied by extremely high trading volume. However, the price closed below the target level, leaving a relatively long tail.
→ The resistance pressure above is significantly strong.
→ The area above a further 100% extension from point D is recognized as an overbought zone, suggesting…
- The current trend may end or experience a pause.
- The volatility may be higher than usual, making price movements more difficult to anticipate.
Furthermore, from a channel analysis perspective, the price is entering an overbought zone, as it has extended by 100% as well.
Traders who wish to continue riding the uptrend may consider holding their positions until a potential trend reversal or breakout occurs. To sustain the uptrend, it is important to watch for the following:
- The prior low level at $328 should not be breached.
- The uptrend channel should not be breached.
There is no correct answer to which TP solution is better, as traders have different trading styles. But one important suggestion is not to turn your winning position into a losing trade. Always have a plan in place to protect your profits.
Disclaimer
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