For most of 2011, Microsoft (MSFT) oscillated within a horizontal channel with a lower bound in 23-24 range and upper bound in 27-28 range. There was false breakout in early 2011, but it did not last long and price fell back into the channel.
Mr. Softy finally made a move to break out of this range in the late 2011-early 2012. It quickly zoomed to 32.95 – 16% rise post breakout – by March ’12, in the process reaching the measured move target of the horizontal channel.
Then it retraced to 30.23 before making another attempt to take out the recent high. It failed and formed a potential double top pattern. This week, MSFT broke below the low of 3023, thus completing the double top pattern. The measured move target of this pattern is 27.51, which is also within 61.8% and 78.6% retracement of the up move up from Nov ’11.
The last time Mr. Softy made such a clear double top was in April 2010. At that the time the two peaks were separated by 16 weeks. This time the duration between them is five weeks. In 2010, Microsoft went beyond pattern target of 23.64 and found a support at 22.73, between 50% and 61.8% retracement of the prior up move. The move after the break out lasted seven weeks.
If Microsoft stays consistent with its history then the current move last till the end of June. Very often in such patterns, the price rebounds to test the breakout level. In 2010, MSFT did try to retest the breakout level but did not come too close.
