Yesterday I stated my market bias as bullish, but that if the market breaks below certain levels then investors should get cautious.
Today’s stock is one that I’d expect to hold up even if the market “head fakes” lower and then turns higher. This is important if you don’t want to get stopped out of a good trade.
This is also a stock that’s poised to lead the market higher.
Microsoft Corp. (MSFT) has a pattern that looks like it’s following the QQQ, but if you look closely, you’ll see that it’s actually stronger. It’s well above its 200-day moving average and just below its all-time high.
As a result, if the markets break below their recent consolidation, MSFT has a good chance of holding up if the market’s break turns out to be a one day “head fake” break and then reverse higher.
Plus, the last 5 days of consolidation have set it up for a nice breakout trade opportunity.
The entry will be when it breaks over 113.50. When this happens, the next resistance is the all-time high around 116 and I’d expect that to be broken also if the market is moving higher.
The stop should be under 110.50.
MSFT tends to trade in a rather sloppy up one day, down then next fashion, which can be frustrating if you look at it too closely. So once it breaks out, keep your eye on the big levels, not the daily highs and lows.
It’s not likely to go up if there is a major market decline, but it is set up to lead any continuation of the current bull move higher.
Rick Nartarian, Chief Investment Officer
The American Investor Daily