Stock Of The Day: Will Microsoft Take The Entire Market Higher?
Shares of Microsoft (MSFT) are testing resistance levels as the company prepares to announce its quarterly earnings. A positive earnings report could break the stock's resistance around $395, potentially leading to a bullish trend for both Microsoft and the broader S&P 500 index, of which it constitutes 6.22%. The stock has faced selling pressure at this resistance level in the past, but a successful breakout could signal a new uptrend for Microsoft and influence the overall market.
Shares ofMicrosoft CorporationMSFT were little changed during early trading on Monday. But that may not be the case for long. The company is set to announce its quarterly earnings on Wednesday after the close. If they are good, it could be a catalyst that breaks the stock’s resistance and sends it higher.
This could be bullish for the broad stock market. This is why we have made it our Stock of the Day.
The S&P 500 Index is composed of 500 stocks. It is a market capitalization-weighted index. This means that the larger a company is, the greater its influence will be on the index.
This is in contrast to the Dow Jones Industrial Index, which is weighted by price. In the Dow, the stocks with the highest share prices have the most influence even if they are small companies.
Microsoft is 6.22% of the S&P 500. If it makes large or important moves, it could have an influence on the rest of the index.
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As you can see on the chart, it has stalled out at resistance around $395.
This level first became resistance at the end of March. The shares reached it, then reversed and headed lower.
When this happened, many of the traders and investors who purchased shares for around $395 came to regret their decision to buy. Many decided to sell, but they didn't want to lose money. So, they also decided to hold onto these losing positions but to eventually get out at breakeven if possible.
As a result, when the shares rallied back to $395, they placed sell orders. The large concentration of these orders formed resistance again at the same level. When Microsoft reached it in mid-April, the same thing happened. A selloff followed.
Now this resistance is being tested once again.
If it breaks, meaning that stock gets and holds above it, it could set the stage for a continued move higher. It could show that the sellers who created the resistance have canceled or finished their orders. Buyers may be forced to outbid each other to draw sellers back in.
This could put Microsoft into a new uptrend. The rest of the market may follow.
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