Microsoft’s recent earnings beat the street and is a classic case of jolting a sleeping giant awake. An impressive earnings report released on April 30th that kept the stock buoyant , which rallied to a four-month high after a bullish start to May. The shares of the tech giant saw a rise of 10.6% in value on May 1st, hitting at $437.1. The company made a strong comeback with a series of four-month highs, recovering from earlier declines. The excitement soon wore off, with the stock easing back to just above $425.0 and reducing its year-to-date gains to 1.67%.
Momentum Hits Resistance
The solid rally pushed Microsoft into technical overbought conditions. Extremely high levels of Relative Strength Index (RSI) readings on the 4-hour chart show Microsoft’s movements, while daily Relative Strength Index (RSI) values climb close to 70, a crucial marker that usually witnesses short-term pullbacks. The recent golden cross formation with the 20-day and 100-day Exponential Moving Averages (EMAs) indicates bullish strength but suggests a potential pause for investors to consider booking profits.
The current focus for the traders is the support level $418.2 in the near term, with the resistance standing at the year’s peak of $448.2, which is approximately 5% above current levels. This will, most likely, bring back volatility when it breaks to that upper limit, especially if ever investors start doubting whether the earnings optimism is already fully priced in.
Optimistic Analyst Sentiment
A short period of cooling has not deterred Wall Street from continuing to believe in Microsoft’s long-term outlook. HSBC increased its price target to $626 from $598, while Fubon lowered its forecast to $490 from $510. These revisions re-emphasize the continuing bullishness, especially regarding Microsoft’s prospects with AI and clouds.
Microsoft’s latest quarterly report was a pretty solid beat, as it wiped away its Q1 losses and put the stock back on recovery mode. The 9.5% post-earnings improvement indicates strong investor faith in the company within the broader technology ecosystem.
Consolidation in Sight
Microsoft now seems to be entering a consolidation phase within the settling dust of the earnings-driven optimism. Long-term, the bullish trend is being sustained by positive analyst revisions and strong fundamentals. In the short run, cautious action on the part of investors may be necessary in the coming days. With the Relative Strength Index (RSI) almost in an overbought position and major technical levels still being worked out, the coming sessions could either validate an upward trend for Microsoft or just provide a short pause before a further rise. The fundamentals are still good, with analyst sentiment anything but bearish, but the overbought situation is near resistance just ahead, so the big question on everyone’s mind is how much of the good is in the price. Unless there is another catalyst, this might be that point in time when investors can take a step back before getting ahead.
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