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Head of Fixed Income Strategy
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Technical Update - Microsoft gapping higher, can it hold on? Alphabet under pressure unless it can close its week old gap
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Summary: Microsoft surprises Bears gapping higher. If gap is not closed Microsoft could be looking at 315 possibly higher
Alphabet share price is under pressure. Short- and medium-term technical picture look bearish. Closing its week old gap can change the picture
Microsoft
Sellers in Microsoft got it wrong yesterday. Earnings surprised and Microsoft has gapped higher at the opening resuming uptrend. Unless bears can close the opening gap of course i.e., can push the share price to close below 291.60, there is likely more upside for Microsoft.
292 is key for medium-term Bull/Bear scenario. If Microsoft can close above there is upside potential to resistance at around 315 possibly to all-time highs around 350.
Weekly RSI is showing positive sentiment with no divergence supporting bullish medium-term outlook.
However, if bears manage to push the share price to close the gap (a body gap i.e., a daily close below highest daily close prior to the gap at 291.60) and RSI closes below its rising trend line on weekly time period it will indicate a larger correction in Microsoft. Possibly down to the 55 weekly Moving Average.
Medium-term down trend will be confirmed if closing below 275.37 Alphabet (C-share) . RSI divergence has been warning about a correction for a few weeks. Since the gap created 17th April has not been close there is downwards pressure. A selling pressure that is likely to push share price to support at around 101.
For this bearish scenario to be demolished Alphabet needs to close the gap i.e., a close above 107.70.
A daily close above 109.58 will confirm an uptrend.
Medium-term. Despite a higher weekly share price close RSI has so far failed to close above 60 threshold meaning it is still showing negative sentiment.
Alphabet also seems to be rejected at the lower Cloud and is currently trading back below 55 weekly Moving Average, which is declining. That is an indication of underlying bearish sentiment.
IF weekly RSI breaks below its rising trendline selling pressure is likely to intensify pushing Alphabet below 200 weekly Moving Average possibly testing
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