Two big cap companies will be reporting after the close with Microsoft and Alphabet slated to report their earnings.
- Microsoft EPS is expected at $2.19 on revenues of $49.05 billion. Microsoft is currently trading at $273.30
- Alphabet EPS is expected at $25.91 on revenues of $68.11 billion. Alphabet is trading at $2418.50
Looking at the price action of Microsoft, the post pandemic low bottomed at $132.52 on March 20, 2020. The high price extended up to $349.67 on November 22, 2021 for a oversized gain of 163.86% over the 14 month period.
Since then, the price has corrected lower by some 22.78% to the low price reached on March 10 at $270.00. The current price is trading just above that level and $273.30.
Technically, the move to the upside off of the March 10, 2022 low moved up to $315.95 reached on April 4. That move briefly took the price above its falling 100 day moving average (blue line in the chart above).
However momentum could not be sustained above that key moving average level, and the price has rotated lower. Failing to extend above the 100 day moving average was bearish development and contributed to the downside momentum seen since then (and indeed some of the big cap names have underperformed this month).
The low price yesterday reached $270.77. The low price today has reached $271.88.
What next ?
Of course much will depend upon the earnings numbers and corresponding details. However, on the downside, the 38.2% retracement of the move up from the post pandemic low cuts across at $266.72. Getting below that level, and staying below would increase the negative bias technically, and open up the door for further downside potential. PS the chart also has a head and shoulder look to it. Personally, I find for every head and shoulder formation that works, there are just as many (more) that don't. Nevertheless, a move below the aforementioned levels would certainly increase the bearish bias with regard.
What would be needed to help the stock?
Looking at the hourly chart below, the falling 100 hour moving average (blue line in the chart below) currently comes in at $286.40. Getting above that level would be required to help kickstart the move back to the upside followed by a move above the 200 hour moving average at $295.54. Absent that and the sellers still hold the stronger hand.
Taking a look at Alphabet on the daily chart, the pair from the March 23,2020 low increase by 201% to the high. The high price was reached on February 3,2022 at $3037.96. The hi in February took out the November high , but only by a couple of dollars before rotating back to the downside.
The move to the downside since the all time high, bottomed yesterday at a low of 2372.53. That was a correction of 22.00% from the high. The decline is similar in scope to the Microsoft decline of -22.78%.
Looking at the daily chart, the move lower over the last few days has taken the price below the 2022 lows from January and February near $2492.97. With the current price is trading at $2403.48. A move back above that level and the March lows at $2526.89 (see red numbered circles in the chart below) would be needed to give the buyers some comfort that a low is in place.
Alternatively, on more bearish earnings or increased selling, the 38.2% retracement of the move up from the March 2020 low comes in at $2266.75. That would be the next major target and minimum retracement level for the stock given the sharp run-up from the 2020 low
Meanwhile, the major stock indices or moving back toward low levels into the close. The NASDAQ is now down 23% below its record high level which is similar to the declines seen in Microsoft and Alphabet going into their earnings .
