Microsoft’s (NASDAQ: MSFT) stock technical setup is signaling more losses ahead as the equity faces bearish pressure, with investors digesting the company’s Q3 earnings report.
In the last trading session, MSFT attempted a recovery, ending the day up almost 1% at $410.37. The recent sell-off has seen the stock drop nearly 5% on the weekly chart.
Looking at the technical indicators, MSFT has formed its first death cross since March 2022. Notably, this chart pattern occurs when a stock’s 50-day moving average crosses below its 200-day moving average, a bearish signal.
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The last time Microsoft experienced a death cross was in March 2022, when the share price declined by more than 25% over the following eight months.
What next for Microsoft stock
This bearish pattern aligns with a challenging period for Microsoft, during which the stock is facing increased volatility, aligning with the general technology sector sell-off. Although the company reported better-than-expected earnings, investors reacted negatively due to its forward guidance.
Concerns about the technology giant’s future profitability have emerged after it signaled plans to increase spending on artificial intelligence. As things stand, the company is already investing heavily in the sector.
The pessimistic outlook is further escalated by stock trading expert with the pseudonym Kpak, who warned in an X post on November 2 that Microsoft’s weekly chart has exhibited a bearish breakdown, signaling potential downside risk.
Following a two-year uptrend, the stock closed below a critical support trendline with a bearish engulfing candlestick pattern. This move suggests a shift in momentum, with the stock closing below the converged 5-, 9-, and 20-week exponential moving averages (EMA), indicating growing short-term selling pressure.
Adding to this bearish outlook is a potential diamond top formation, a pattern that generally marks a transition from a strong uptrend to a downtrend, often occurring at market tops.
On the other hand, a financial markets commentator with the pseudonym LadeBackk noted that Microsoft has seen fluctuating investor sentiment, with recent data indicating Wall Street might be less bullish on the tech giant in the short term.
However, the analyst believes this dip in sentiment signals a buying opportunity. Historically regarded as one of the safest, most robust, and most stable stocks, Microsoft could position itself for a stellar performance in 2025.
For instance, the commentators shared data indicating that on October 31, 2024, options activity for the $440 call contract expiring on March 21, 2025, showed significant movement, reaching a high of $16.25 and a low of $14.59.
This options activity may indicate a growing interest in Microsoft’s potential upside despite broader market hesitancy. He noted that the stock is well-positioned to become a “darling” of 2025.
Analysts’s take on MSFT share price
Meanwhile, following recent stock movements, analysts have also shared their outlook for MSFT. As reported by Finbold, Karl Keirstead from UBS maintained a ‘Buy’ rating with a price target of $500, down from $510.
JPMorgan’s (NYSE: JPM) Mark Murphy shared a bullish outlook. Based on the company’s long-term growth prospects, Murphy has an ‘Overweight’ rating and a price target of $465, down from $470.
These sentiments come as Microsoft looks to maintain its valuation above the $400 support zone, though some analysts believe the stock could reach $500 by the end of 2024.
