Microsoft’s (NASDAQ: MSFT) technical indicators are displaying a concerning outlook for the stock as the equity continues to take a hit from the broader market sell-off.
Indeed, MSFT’s recent losses have led to the stock losing the $400 support level, ending the last trading session at $397.90, down 1.5%. Microsoft is also in the red year-to-date, having plunged almost 5%.
MSFT forms death cross
Amid the current trading levels, the stock has triggered a death cross formation for the first time in almost a decade.
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This pattern, characterized by a short-term moving average (MA) crossing below a long-term moving average, specifically, a downward-sloping 200-day moving average, has historically been viewed as a bearish signal.
Notably, the potential downside from the death cross formation is further complicated by the downward-sloping 200-day moving average, which points to a possible sustained erosion of upward momentum and a shift toward a bearish trend.
Microsoft started 2025 on a strong note, climbing to a peak of $447 in late January. However, recent price action indicates a potential trend reversal.
The formation of a death cross raises concerns about prolonged downside risk. In particular, MSFT may test the critical $350 support level, especially if broader market weakness persists.
Conversely, Elephant Capital’s technical analysis platform does not see MSFT’s losses escalating. According to an X post on February 25, the platform noted that the current losses might represent the final stages of a major corrective wave before a potential rally beyond $510.
This projection is based on the weekly chart, which suggests that MSFT is completing wave (4) of a broader Elliott Wave structure, setting the stage for a fifth wave advance. Such patterns often precede a “blow-off top” characterized by rapid price acceleration.
Meanwhile, MSFT could reach a high of $500, at least per the outlook of one Wall Street analyst. Specifically, Goldman Sachs has set this price target, reaffirming a ‘Buy’ rating.
Despite concerns over data center leases, Goldman views Microsoft’s spending as disciplined, even amid the AI boom. Analyst Kash Rangan expects earnings per share (EPS) growth as Gen-AI shifts from infrastructure to applications.
He also highlighted Microsoft’s $300 billion in remaining performance obligations (RPO), strong AI positioning, and 75% year-over-year growth in commercial bookings, making it a compelling pick over Oracle.
Microsoft fundamentals
Overall, Microsoft still has strong long-term growth potential. The company’s advances in artificial intelligence (AI) and cloud computing remain key catalysts.
This comes as CEO Satya Nadella admitted that, at the moment, AI has no real value but sees the technology as having significant economic potential in the future.
Microsoft is also investing in quantum computing. It recently unveiled its Majorana 1 chip, which the technology giant claims is less error-prone than rivals. Quantum computing could enable calculations that would take current systems millions of years and may disrupt modern cybersecurity.
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