stock trading - microsoft
Finance,  Technology

When to buy Microsoft’s stocks (MSFT) for a profit? A technical analysis (March 2021)

 

Note: The information in this article is NOT financial advice.

 

Outline

 

When the prices of Microsoft’s stock (MSFT) are plotted over time, some patterns can be observed with indicators, such as Bollinger Bands, Volume, RSI, and MACD. Likelihood of the stock price to rise may be inferred. In what follows, Microsoft’s stock (MSFT) prices are plotted; each price point on the chart is the average of the stock prices over one day, and the window represents one year. A conclusion will be drawn on the likelihood of the stock price to rise in March 2021. (TD Ameritrade’s thinkorswim platform is used.)

Bollinger Bands

Bollinger's Bands - stock market
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When the Bollinger Bands are placed against the stock prices, a pattern can be observed. This pattern can be used to infer when the stock price is likely to rise and drop. When the stock price touches or crosses the lower band, it eventually hits or crosses the upper band after some time (see image), and vice versa. Sometimes, the price only needs to gets close enough to either the lower or upper band to observe this pattern (see image). When the midline or mid-band of the Bollinger Bands has a positive (upward) trend, the price tends to stay above the midline, and when the midline or mid-band has a negative (downward) trend, the price tends to stay below the midline (see image).

Volume

Volume - Stock Trading
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When the price crosses, touches, or nears either the lower or the upper band, there is an uptick in the volume chart (see image). The uptick may occur slightly after the price crosses, touches, or nears the lower or upper band. By an uptick, we mean a rise in the volume, where the volume for the day before and the volume for the day after the uptick are lower than the volume that causes the uptick.

Relative Strength Index (RSI)

RSI - Stock Trading
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Roughly, when the price goes up, so does the RSI, and it goes down when the price goes down (see image). When the value of the RSI nears 30, the price tends to cross, touch, or near the lower band, and when the value of the RSI nears 70, the price tends to cross, touch, or near the upper band. The trend of the RSI graph tends to coincide with the trend of the midline of the Bollinger Bands.

Moving Average Convergence Divergence (MACD)

MACD - Stock Trading
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When the price has a positive (upward) trend, the cyan line is above the yellow line (see image), the farther apart these lines are (or the more they diverge), the more positive the price trend is. When the price trend turns negative (downward), the cyan and yellow lines meet (or converge) and cross each other, and the yellow line is above the cyan line; the farther apart they are, the more negative the price trend is.

When to buy Microsoft’s stocks for a profit?

Buy Order - Microsoft Stocks
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When Microsoft’s stock price crosses, touches, or nears Bollinger’s lower band, there is an uptick in the volume , which suggests high trading activity. If, at the same time, the RSI value is low, there is a chance it may go up, which would be sign of a rise in the stock price. Furthermore, if the yellow line of the MACD graph has been above the cyan line and both lines are converging, that is a sign of a change in trend, from negative to positive. Finally, if the Bollinger bands are wider apart, that is a sign of higher volatility. On March 4th, 2021, most of these conditions seem to have been satisfied, although the trend of the midline is slightly negative (see image).

Last Words

Based on patterns of Microsoft’s stock prices when indicators such as Bollinger Bands, Volume, RSI, and MACD, are used, it can be inferred that Microsoft’s stock price is likely to go up after March 4th, 2021. 




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