Microsoft Corporation (NASDAQ: MSFT) stock had fallen more than 31.5% from its all-time high when it reached its worst point for the week. That’s the worst drop we’ve seen in over a decade.
Bulls who had been betting on Microsoft Corporation (NASDAQ: MSFT) have found it difficult to digest the company’s recent stock performance.
A short while ago, Alphabet (GOOGL) (GOOG), Microsoft Corporation, and Apple (AAPL) were the top mega-cap technology companies in terms of their relative strength. They were the best of the group and weathered the selling pressure very well compared to their contemporaries.
As of right now, only Apple is a member of that club (and Tesla (TSLA) has only lately joined them), although, in the past, there were a significant number of other companies.
Microsoft has offered a 10% dividend increase just this week after reporting mainly solid quarterly earnings, and it did it just this week as well.
Microsoft Corporation Stock Tumbles
On Tuesday, however, it appears that none of this has mattered as Microsoft shares reached new 52-week lows.
Aside from those pullbacks, only two significant corrections stand out: the 28.0% correction in 2010 and the 30.5% correction at the Covid lows in March 2020.
The previous correction and the one currently taking place are the only two pullbacks that have been bigger than 30 percent.
Microsoft Corporation stock had fallen 31.5% from its all-time high when it reached its worst point for the week. Therefore, a correction of this kind is rare, at least in comparison to the previous ten years.
Even though the pullback has been challenging, the levels are now evident.
The price of each share is hovering precariously close to $240 at the moment. This represents the 50% retracement of the decline from the all-time high to the covid bottom in March of 2020. It was also in June of this year that the year’s lowest point was reached.
If this level is maintained, I am interested in following Microsoft’s performance on a rebound to $250. Above that level, the market could potentially test its 10-week and 21-week moving averages, located in the low to middle $260s.
On the other side, a dip to the region between $215 and $225 would be possible if there is a breach of the $240 level followed by a subsequent closing below that level. This would open the door to the possibility of a drop.
Even if that is an extensive range, there will be a lot of volatility, and we need to focus more on critical zones than specific levels down to the penny.
In any case, this $10-wide zone encompasses the 61.8% retracement, the 200-week moving average, and the breakout level for 2021, which is close to $225.
It’s worth noting that the 161.8% downside extension of the current range comes into play at $210, which is measured from the “D” leg high down to the “C” leg low in the previous field.
Although this would result in Microsoft Corporation stock falling by almost forty percent from its all-time high, I believe this is a situation in which long-term bulls are compelled to buy the stock rather than sell it because of how valuable an asset this firm is.
In that regard, it has a striking resemblance to the structure of Alphabet.
Image: DepositPhotos © Wrightstudio
Author Valerie Remorosa