Why Microsoft Stock Needs To Regain This Key Level And Where To Watch For The Bounce

Microsoft Corporation MSFT was edging lower in the premarket Thursday after a bearish day on Wednesday saw the stock close 1.26% as it continued in its downtrend.

The drop in bearish pressure came into Microsoft after the stock was rejected from the 200-day simple moving average (SMA) on Monday and Tuesday, after falling under the level on Friday.

The 200-day SMA is an important bellwether. Technical traders and investors consider a stock trading above the level on the daily chart to be in a bull cycle, whereas a stock trading under the 200-day SMA is considered to be in a bear cycle.

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The 50-day SMA also plays an important role in technical analysis, especially when paired with the 200-day. When the 50-day SMA crosses below the 200-day SMA, a death cross occurs whereas when the 50-day SMA crosses above the 200-day, a bullish golden cross takes place.

The Microsoft Chart: Unlike the S&P 500, which formed a golden cross on Feb. 3, many big-cap tech stocks, including Microsoft, have failed to trade above the 200-day for long enough to cause the 50-day SMA to cross above the 200-day. That was a warning sign that the bullish cycle in the S&P 500, which lasted from Jan. 6 to Feb. 15, could be coming to an end.

On Wednesday, Microsoft printed a bearish Marubozu candlestick, which indicated lower prices would likely be seen on Thursday. Eventually, Microsoft will print a bullish reversal candlestick, such as a doji or hammer candlestick, which could indicate the local bottom has occurred and a bounce is in the cards.

Microsoft is trading in a steep and consistent downtrend, printing a series of lower highs and lower lows. The stock’s most recent lower high was formed on Feb. 27 at $252.82 and the most recent confirmed lower low was printed at the $248.10 mark on Feb. 24.

On Wednesday, Microsoft was looking to open under the 50-day SMA, which is bearish. Just like the 200-day SMA, the 50-day acts as a heavy area of support and resistance and bullish traders will want to see the stock regain the 50-day quickly.

Microsoft has resistance above at $249 and $256.84 and support below at $243 and $238.42.