Stock Of The Day: Is This The Bottom For Microsoft?

Shares of Microsoft Corporation (NASDAQ:MSFT) are little changed on Friday. That wasn't the case yesterday. They dropped by 10% after the company reported its earnings.

Microsoft is our Stock of the Day. It may have found a bottom, and it could even reverse and move higher.

As you can see on the chart, the shares found a bottom around $420. This wasn't a coincidence.

Last May the stock gapped up to $420. This was about a 7.5% move. When this happened, many investors and traders sold shares. They thought it was a good decision.

It turns out that they were wrong.

The stock continued to move higher. When this happened, some of the people who sold experienced seller’s remorse. They wish they didn't sell, and they wanted to buy their shares back.

But they would only do so if they could buy the shares at the same price they were sold for.

So yesterday, when the stock fell back to around $420, these disappointed sellers placed buy orders. The large number of these buy orders created support at that level, putting a floor under the price.

There is a chance that Microsoft moves higher from here. Sometimes, stocks rally after they reach support.

This happens when some of the investors and traders who created the support with their buy orders become anxious and impatient.

They know the sellers will go to whoever will pay them the highest price. They don't want to miss the trade, so they decide to increase the prices they are willing to pay.

Other anxious, impatient buyers see this and do the same. They raise their bid prices, too.

This could result in a snowball effect that pushes the price higher. There is a good chance that Microsoft reverses and rallies from here.

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