MSFT recovery hopefully extends

At Tricio we focus on economic cycles, market structures and investor behaviour in order to help clients navigate markets with a medium to long-term investment outlook. We often use charts as a gauge of investor sentiment and behaviour.

We posted a blog a few months ago and one in March about the meltdown in Microsoft shares from their all-time high, pointing out why we thought this mattered. The recovery in the share over the last few weeks, from a very big chart support zone, is worth looking at. This is due to the importance of MSFT in key market indices, as the leading ‘software as a service’ company and its historical role in driving US equity market performance since the 1990’s.

The long term chart below (weekly, semi-log with 13 and 50-week moving averages) shows that the key horizontal blue line held up – keeping the share from breaking below former resistance (November 2021 high) and the key April 2025 low. A push higher to new all-time highs will hopefully be in the cards. Then, off to $750/$800 and higher on simple extension targets.

The short term chart below could be useful in gauging some resistance levels to regain now. Failure to punch above these levels would suggest that the current recovery is a potential ‘dead cat bounce’ as sentiment picked up as US Pres. Trump seems keen to look for an exit from his war in Iran.

Watch the 13-week moving average near $470 as resistance, near the lower horizontal red line. The rising green line (former support) is important ahead of this near $440. The top red line marks the $555 area ($555/$553) double highs. The big fear? This could be a messy head and shoulders pattern forming. The first shoulder formed in 2024, the head formed in 2025 and the last shoulder could be forming now. This would emphasize the importance of holding the horizontal blue line support area, as possible neckline (sort of) support.

In other words, the risk is that the current recovery in the share price runs out of puff ahead of the $470 area (or slightly higher), and doesn’t break to new highs. Then a period of consolidation follows. Then a slow drift lower below some key support lines – and then a big top unfolds for sub-$250 levels. For now, hoping for the best as always, but it may be prudent to plan for the worst. In this case, keep an eye on the share performance over the coming weeks to see if investor sentiment really has shifted away from thinking that excessive spending on AI may not deliver increased profits/margin expansion, and that software companies may go the way of the dinosaur as AI does the tasks and eliminates the jobs.

For further information on our research insights and our ‘Ask a Buddy’ CIO service please contact us at info@tricio-advisors.com 

Gerry Celaya,

Chief Strategist