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Price:This is the big MSFT, a 20% price drop is unusual for MSFT, and it usually recovers and keeps its price pretty well. However, objectively speaking, the price is not able to make an higher high, which is troublesome. The price is also not able to pierce through the 20 day Moving Average (20MA) convincingly. A pretty sad price picture. Volume: Volume is not enthusiastic while trying to make a higher high. Volume is higher during the lows than during the highs, also indicating lack of enthusiasm. Stochastics: Stochastics is overbought and we haven't even seen the higher high yet. ADX, +DI and -DI: -DI made three excellent pivot highs in sync with the price lows. +DI is now making a lame attempt at dominance. It is true that the previous downtrend is loosing steam quite rapidly as demonstrated by the rapidly decreasing ADX. MACD: MACD shows plenty of enthusiasm with lows and highs divergent from price. A pretty bullish MACD. Conclusion: Some positives and a bit more negatives. The disappointing price action, the lack of volume and the strong -DI are not encouraging, but the bullish MACD is promising. If price was making an actual higher high, it would be different: in that case price would test its most recent low and a long buy could be entered when/if that test succeeded. As is, the situation looks more like a shorting opportunity. Remember though that this is MSFT, a very strong stock. Good stops need to be set as soon as any trade is made. Below is the stock 2 weeks later. MSFT indeed dropped like a rock, -DI is still looking very dominant, MACD still shows bullish divergence, and volume increased some on the way down. Stock is still not looking anything like a buy at this point. However, given that MSFT dropped some 25% in 2 months, it might be soon time to buy, this is not some little company!  Chart by
www.FreeStockCharts.com
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