Microsoft Forming a Flag Pattern

Microsoft MSFT, which reported earnings in mid April, has seen little follow through after beating on the top line and bottom line.  The company reported EPS of $0.60 on revenue of $17.41 billion. The street was expecting $0.58 on $17.18 billion.  Monday's weaker than expected Chicago PMI was a drag on many tech stocks, but news that the software giant will invest $300 million in Barnes & Noble’s digital eBook business, helped the stock edge a gain. 

The stock price is creating a flag pattern after gapping higher after earnings.  The gap that was created after the company reported has now been filled.  Price action has taken the stock down to support near the 50-day moving average near $32.00.  A break of this level would likely see a test of support levels near the 20-day moving average at $31. 

Resistance on the large tech stock is seen near the recent highs at $33 per share.  This coincided with the upper end of the Bollinger band using a 20-day moving average and a 2-standard deviation range.

Momentum on the stock has recently declined after the MACD made a buy signal after earnings in late April.  The spread (the 12-day moving average minus the 26-day moving average) crossed above the 9-day moving average of the spread.  The index on the MACD remains in positive territory, just below the highs seen in late March.

The RSI (relative strength index) which measures overbought and oversold levels is printing near 54, which is very close to the middle of the neutral range. Recent resistance near $33 coincided with a peak in the RSI near 70. Volume on the large cap stock has declined over the past 5 trading sessions, moving below the 50-day moving average of volume.