MSFT May 3, 2024: An Analysis of A Previous Consolidation Zone

At the close of May 3, 2024, this is the second week MSFT touched the 30-weekly MA and bounced back.

Let’s look at a recent time when MSFT was also trading around its 30-week MA for a while before resuming an uptrend. That was during September and November 2023 (an area where I use the yellow arrow to point to).

Below we will zoom in to this area and make some analysis on the daily chart.


Let’s look at the session on Oct 30, 2023, where I point to with the yellow arrow.

The second pane is the Relative Strength Line

There are a few things we can notice here

• First, there is a consolidation zone forming from the beginning of October 2023 before this breakout.
  
• Second, the consolidation zone is above the MA-20/50/150/200. Especially, the MA-20 (green) and MA-50 (blue) are very closed to each other.
  
• Third, if you look at the period before that, from August to October, which I marked with 2 white rectangle, we can see that that short-term volatility contracted relative to the long-term volatility, indicating a contraction zone here.
  
• Lastly, if we look at the relative strength, it goes up all the way during this consolidation, making a new high before the stock itself.
  

Those are the combination of many factors: a pattern, contraction zone, moving averages, relative strength, suggesting a buy point for the stock. It is not simply a support from a 30-week MA, but many other technical characteristics.

Therefore, I expect to see similar characteristics to happen now to enter this stock again, i.e.,

• The relative strength should cross above its EMA-21 which is likely to happen next week if the overall market continues to act well
  
• The MA-20 should cross above MA-50
  
• The price should be consolidating above the MA-20 and MA-50
  

I will update here as I will be trading MSFT in the near future.