Microsoft - Bearish divergences

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Microsoft             has been in a very nice uptrend since the end of 2013, an uptrend which has been supported by the EMA wave. Whenever Microsoft             retraced to the EMA , it was a good time to buy. Allthough the signals are very bearish , if there will be a buying signal at the Wave, I am not going to ignore it.

We can see three higher highs on the chart. At the second higher high, the MACD lines were drawing a class C bearish divergence, which is the weakest, a slight histogram divergence and a class A bearish divergence on the FI             . Price did fall, but only to test the broken resistance and rally to a new high. At the current high, the bearish signals are even more obvious. The MACD lines have drawn a class A bearish divergence, another class A bearish divergence on the FI             and a continuation of the histogram divergence, which shows how little steam was left for the bulls. Now look at the volume . It is very rare to see such a clear divergence between price and volume . Volume experts see divergences immediately, but for a volume amateur like myself, this is a clear divergence between price and volume .

First support comes out at 39, but I dont expect a bounce from it, because it has been allready tested (if you look closely you will see a daily double top ). First good support comes only at 35.50, and that will be a buying area. If price goes to 35.50, the EMAs will be around that level too, as they will flatten out because of the fall. A rejection from that level would be enough proof that a new rally will emerg, if not to a new high, at lest to 39$. Note that these two support levels are in an area where there is strong multi year support.

The second target would be the 30-33$ area. Allthough not so important if you take into consideration the last 10 years, it has served as good resistance and support for the last few years.

Now that I have a short bias in Microsoft             , I will trade using the daily chart . Currently the daily is in sell mode, but I would like to get my short a few cents higher. I will be posting charts with my entry, if I don't miss it of course. I think that the next few days there will be a push to 40.50$.

Microsoft             has a very high correlation with the overall market, which I don't really like because I usually take positions on the indexes and they can both go against me at the same time. The Dow is near the all time high, and I believe that the nasty bearish divergence I pointed out a few weeks ago didn't play out yet. The Nasdaq, which is the technology index, is much weeker, and I think it might be at a very very important level where shorting would be fantastic. The NFP is coming tommorow and that might be the trigger for a selloff.
Actually took this trade today at the open. Nice find. Will let you know how it does.
vlad.adrian PRO TradeVulture.com
Thank you! I had my screen on Microsoft at the open, and the gap up seemed really attractive, but I didn't pull the trigger for some reason... Maybe I'll get a second chance
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