Money Markets

Microsoft Corporation (MSFT): What are the Technicals Saying?

Most of the investors recently have been curious over the performance of Microsoft Corporation (NASDAQ:MSFT) stock. It is widely believed that a stock’s future performance can best be predicted by analyzing prior trends and patterns in price. In the case of MSFT, the chart has some interesting things to say about where the stock might be headed in the future.

How has the stock performed recently?

Microsoft Corporation (NASDAQ:MSFT) has been trading in a bullish manner, based on the relative positions of the stock’s 20 and 200 day moving averages. In the last month, the price of MSFT has decreased -0.52%. Shares are now up over the past year, outperforming the broad market by -100% and outperformed a peer group of similar companies by 83%. After the latest session, which saw the stock close at a price of $89.13, MSFT sits below its 52-week high.

Momentum indicators

Of course, these surface-level price movements don’t tell us much about the direction that MSFT may be headed in the future. Fortunately, there is way to use the speed and magnitude of these price changes to predict future performance, thanks to what are known as momentum indicators. As momentum slows, it might be a sign that a support or resistance level has been reached, and that a trend is about to reverse. Two such indicators are the RSI (Relative Strength Index) and the Stochastic %k Oscillator, which fluctuate on a scale of 0 to 100. A reading above 70 indicates that a stock is overvalued, and a reading below 30 implies that it is undervalued. The 20-day RSI for MSFT is 50.68%, which suggests that the stock is not particularly expensive or cheap, and not predisposed to a reactive price movement based on this measure. The 20-day Stochastic %k measure, which sits at 27.02%, tells a different story, and suggests that MSFT currently trades in oversold territory.

What do the trading volumes reveal?

Analysts use volume trends to assess the level of conviction behind a stock’s price changes. When volumes suddenly increase above normal levels, it can be a sign that investors feel very strongly in one way or the other about the future direction of a stock, or may even have access to inside information. Microsoft Corporation (MSFT) average trading volume of 39,407,109 during the past month is 64.26% above its average volume over the past year, indicating that investors have been more active than usual in the stock in recent times.



What do the analysts think?

MSFT is currently undervalued by -14.5% relative to the average 1-year price target of $104.24 taken from a group of Wall Street Analysts. The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 1.80, which implies that analysts are generally bullish in their outlook for MSFT over the next year.

How risky is the stock?

Absolute price performance isn’t the only thing analysts consider when predicting future performance: volatility matters as well. Beta, which measures the stock’s volatility relative to the overall market, is a simple but effective metric for assessing risk.

Microsoft Corporation (NASDAQ:MSFT) has a beta of 1.11, compared to a beta of 1 for the market, which implies that the stock’s price movements are more extreme than the market as a whole. MSFT therefore has an above average level of market risk. During the past couple of weeks, MSFT average daily volatility was 41.49%, which is -17.95 percentage points higher than the average volatility over the past 100 days.




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