Shares of Microsoft, the company that gave us Zune, Windows Me and Microsoft Kin — surely your remember their social networking phone? — are in a parabola so steep you’d think the company was about to introduce WinCancerCure. I’ve mentioned MSFT in The Morning Line today as one of the very few remaining stocks providing market leadership. The fact that it has punched through a very long-term ‘secondary pivot’ at 51.98 is evidence that it could run up as high as 64.35 before the bull market has run its course. Assuming this forecast proves correct, it’s doubtful the broad averages would begin to fall before the Fat Lady from Redmond has sung. Indeed, this stock is as reliable a bellwether as we could track to discern the mood on Wall Street. It would be incredible if such a monster-cap stock were able to hit 64.35 before New Year’s Eve — a 16.5% run-up from here. If so, it will be time to reef the sails. Traders please note: MSFT would become a ‘mechanical’ buy on a pullback to 51.98, stop 47.85. _______UPDATE (December 20): Even though the stock got creamed on Friday, the selling stopped short of generating a bearish impulse leg on the daily chart. That would required a print at 53.25 — 78 cents beneath the intraday low. Let’s see if bulls can hold that line as the new weeks begins._______UPDATE (December 29, 8:36 p.m.): Bulls more than held the line — they pushed the stock nearly 6% higher in a little more than a week. My immediate target is 57.15, a Hidden Pivot where I expect a tradable top to form. _______ UPDATE (January 4, 9:54 p.m. EST): The rally died 30 cents shy of the target. This is mildly bearish, but let’s wait to see more evidence. ________ UPDATE (January 5, 6:45 p.m.): If the stock has gone no higher than 55.39 overnight, you can bottom-fish weakness with a 54.03 bid, stop 53.94. The new chart shows the corrective pattern underlying this strategy. _______ UPDATE (January 6, 3:17 p.m.): The breach of p=54.07 (where A=56.19 on the 60-minute on 12/31) spells p2=53.29, or D=52.59 if any lower. D looks like all but a done deal to me. _______ UPDATE (January 7, 10:23 p.m.): Adjusting on the fly, we’ll use 51.93 as a place to try bottom-fishing with a tight stop. This Hidden Pivot support can be found on the 240-minute chart using these coordinates: A=56.85 (12/29); B=53.39; C=55.39. _______ UPDATE (January 10): Cancel the bid. Although the 51.93 target remains valid in theory, Thursday’s opening-bar plunge to within 14 cents of it created a structural ‘floor’ that will likely have robbed the target of its usefulness. Bottom-fish using ‘camouflage’ is still okay, since we still have expectations of a tradable turn from these levels. If we’re wrong and the stock plummets through the support, you can use these pivots to nail the stairstep move lower: p=51.59; p2=50.77; and D=49.94. The chart, a new one, shows the relevant pattern.
