Software giant Microsoft Corporation (MSFT) is a component of the Dow Jones Industrial Average that has been one of the best performing stocks so far in 2018. Microsoft shares closed Monday, Sept. 10, at $109.38, up 27.9% year to date while the Dow 30 is up just 4.6%. The stock set its all-time intraday high of $112.78 on Aug. 31 and is trading between my quarterly value level of $105.06 and my risky level for September at $114.85.
Microsoft has become a diversified technology stock by expanding from Windows software. The company's cloud computing platform Azure is gaining market share, and its Xbox gaming platform remains popular. Microsoft has also been a strong player in social media since its acquisition of LinkedIn. Furthermore, fans of the Surface Pro are looking forward to the latest version of this popular computing platform. (See also: Microsoft Prepping a Dividend Surprise: MS.)
The daily chart for Microsoft
Microsoft has been above a "golden cross" since Aug. 15, 2016, when the stock closed at $58.12, which justified adding to a core long position for the stock. A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average, indicating that higher prices lie ahead. The stock has been tracking its 50-day simple moving average higher all year long, with the level now at $106.85.
Microsoft stock is well above its semiannual value level of $94.10, which is the horizontal line in the middle of the chart. The third quarter began with a quarterly pivot of $105.06, which proved to be a level at which to buy between July 13 and Aug. 2. The stock set its all-time intraday high of $112.78 on Aug. 31, and my monthly risky level for September is above the chart at $114.85.
The weekly chart for Microsoft
The weekly chart for Microsoft is positive but overbought, with the stock above its five-week modified moving average of $107.84. The stock is well above its 200-week simple moving average, or "reversion to the mean," at $65.18. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 82.32 versus 82.52 on Sept. 7, with both readings above the overbought threshold of 80.00. A close this week below $107.84 with the stochastic reading declining below 80.00 would result in a downgrade to a negative weekly chart.
Given these charts and analysis, investors should buy weakness to my quarterly and semiannual value levels of $105.06 and $94.10, respectively, and reduce holdings on strength to my monthly risky level of $114.85. (For more, see: Microsoft Turns to Subscription Model for Xbox.)