Microsoft (MSFT) Always Drops When This Happens
Published June 6, 2017
Microsoft (MSFT) has been in a bull trend since 2012. On six occasions through this bull, three of the technical indicators discussed below are at the same or higher levels than they are now. I have laid out the reasons and levels to which the stock may dip while it most likely continues its overall bull trend.
When we take a look at technical indicators, the relative strength index (RSI) is at 75. RSI tends to determine trends, overbought and oversold levels as well as likelihood of price swings. I personally use anything above 75 as overbought and anything under 25 as oversold. Currently the RSI is oversold.
The positive vortex indicator (VI) is at 1.2626 and the negative is at 0.7155. When the positive level is higher than 1 and higher than the negative indicator, the overall price action is moving upward. When the negative level is higher than 1 and higher than the positive indicator, the overall price action is moving downward. The positive VI is currently at an extreme level to which it and the stock always retreats from.
The stochastic oscillator K value is 90.1109 and D value is 87.9759. This is a cyclical oscillator that is highly accurate and can be used to identify overbought/oversold levels as well as pending reversals and short-term activity. I personally use anything above 80 as overbought and below 20 as oversold. When the K value is higher than the D value, the stock is trending up. When the D value is higher that the K value the stock is trending down. The stochastic is currently overbought, and the stock should decline in the next few days.
Since the current long-term bull began, there have been six times when the RSI and positive VI were at or above their current close price while the stochastic was overbought. These occasions led to a drop in the stock. The median drop occurs over 8.5 trading days and results in a 4.34% loss. The minimum drop on these occasions is 3.58%.
Considering the RSI, TSI, VI and stochastic levels, the overall direction favors a move to the downside. Based on historical movement compared to current levels and the current position, the fund could drop at least 3% over the next 28 trading days if not sooner.
DISCLOSURE: I currently do not have positions in the stock mentioned above. I do not plan to initiate a position within the next 72 hours. Historical movements and technical indicators should never be the sole basis for entering positions involving risk. Make sure appropriate research is conducted prior to taking any risk in a marketplace.