In this article we will cover how the September 2021 bearish sell signal for Microsoft (Nasdaq:MSFT) with an initial goal of $220 prior to examining the latest valuation announced by Microsoft to move into investing in AI in 2023, we will Then look at the charts to see where Microsoft stands technically and whether investors are convinced the tech giant has bottomed out.
In September last year You have issued a sell signal Microsoft has the $240 region with an initial target of $220 and an overall target of $190 if the first bearish wave is to be digitalized. So far, Microsoft bottomed at $213 and is holding a potential bullish wave structure that would start the third wave north if $263 is broken above it, instead we are making this potential structure fail on a break of $213 support with an immediate target of $190 .
The year 2023 could see a significant acceleration in investment in artificial intelligence for technology companies. Microsoft is looking to compete in the race to bring the best AI tools to the users. The daily scenario would be as follows, a salesperson arrives at his desk at 9 am to find 30 different sales leads, your software package tells you, these 5 particular leads are your best chance to close today’s deal, put the hottest leads directly in The top of your list is yours. This level of sophistication is where technology companies look to provide users.
In Microsoft’s case, they’re evaluating the largest-ever startup investment targeting an edge against Google in advanced AI tools. According to Bloomberg, The company is in negotiations to invest $10 billion in Open AI Which has shown over the past several years that it can do a lot more than normal research.
In 2019, Microsoft invested $1 billion in creating the then Open AI. Now the company clearly wants to rival Google for advanced search options for its Bing search engine.
As AI becomes more prevalent and algorithms get smarter, user productivity is improved. Not just Microsoft, tech companies in general are looking to enhance the capability of their AI architecture which so far has been an incremental process.
So could this potential move have an impact on Microsoft’s share price in the future. The answer is yes, but as we speak, these stocks remain between two important price points. We’ll now turn to the charts to examine the next direction Microsoft might head. But first, we’ll look at the bearish wave Microsoft is currently evaluating and whether the selling pressure has reached an end.
First, if we look at the previous chart from when I wrote my last article on Microsoft, we can see the wave pattern from September 2022. Issuing a sell signal at around $240, Fibonacci 161 would be the obvious next stop for these stocks.
We can now see in the current monthly chart below, by November, Microsoft had bottomed out at $213, creating a bullish monthly candle from that price area. Then December saw a high of $263 and for a possible bullish structure, it was a very important rejection candle. This month, Microsoft is back in the $220 region and has seen a bounce from that price range. We could also see the next bearish technical level which is at $190 if $213 is broken.
Unfortunately, I don’t have a crystal ball, so we’ll have to go to the line “failing to plan is planning to fail” and plotting out this potential bullish structure if it realizes itself. With investors so far that might be invested from $213, they’ve seen a nice bounce higher from there and will be looking for Microsoft not to come back lower from here with a $263 crossover right on the horizon.
We can see in the enlarged skeleton of the bullish wave pattern below that if Microsoft holds above $220 from here on out and the price gets pushed above $263, we will have a third bullish wave on our hands. The first target will be Fibonacci 161 at $294 and I will look for the $314 price area to complete the wave.
To finalize, I’m issuing a comment signal taking into account Microsoft’s earnings reports later this month along with any pending announcement of an investment in Open AI that may come in to give direction to the share price.
It is important to note that a break below $213 from here could lead directly to $190. Also, as mentioned, a break above $263 could trigger a third wave breakout to $314. When any of these support or resistance areas are broken, I will post a follow-up article with an additional trend indication.