Microsoft is close to challenge its 2007 top

Denver, CO, 07/11/2013 (Avauncer.com) – Microsoft Corporation (NASDAQ:MSFT) (Closed: $34.70, Up: 1.02%) is showing good strength like many other tech stocks. It is not very far from its 2007 top of $37.50 and if it manages to break that high and conquer $38.10, that would signal the end of a 12 year long sideways range. Naturally, investors would wait to see if the stock really can manage it.

The stock rallied to $31.50 on December 2009 from the low of $14.87 and began to create a smaller upward range. It took the price more than 3 years to break out of the range when it rose vertically from $29 to $35.80. A correction from $35.80 took the price to retest the 2012 high of $32.95. Then the current rally started. This rally from $28.50 to $35.80 is nicely contained in a channel which must hold for the momentum to be intact. The lower boundary of the channel is currently situated at $33.30.

In the daily charts, we can see the recent correction taking the form of a Neutral Triangle, a pattern discovered by Glen Neely of Neowave fame, where the third leg between the five legs of a triangle is the largest. That would be the fall of $35.17 to $32.57 in this case. This scenario would be validated only by a fast move above $35 by the stock or else this would be suspect and we would expect a more range bound movements.

The daily RSI is supporting further momentum and weekly RSI has cooled off well in case the price rises above $35. MACD is bouncing from the zero line into positive territory once again. All this augurs well for the bulls. But no matter how good signals it generates, any indicator must be supported by price.

Volume rose with the rally and declined in the ongoing correction, implying no serious distribution is taking place. We need a move above $35 with above average volume to jump on the bullish bandwagon once again.