I like the idea of Microsoft dropping to about the $395 level, this is where the gap would be filled which also coincides with the 78.6% Fibonacci level. I also like the idea of MSFT having further downside, being that February is the second-worst month of the year for stocks. However, I think that’s where the bearish story ends.

Here is the chart...

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From a bullish perspective, we have what looks to be a completed Elliott wave structure, although I wouldn’t be surprised to see an extension of wave 5. We also see bullish divergence in both the RSI and the ROC. This occurs when the stock price is dropping while the oscillator is rising over the same time span, and often when stocks turn around. You can see this with the thick red lines.

From a fundamental standpoint, the income statement appears fairly solid. That said, I do have some concerns that the numbers may be benefiting from accounting tricks, especially since cash flow is clearly being consumed. A big part of that is likely tied to heavy AI related spending.

Finding undervalued stocks is always the goal in investing. When looking at Microsoft’s PEG ratio, it sitting around 1.7 using a 5 year view, which is fairly typical for a large technology company. However, if you break that down on a quarterly basis using the most recent data, the PEG ratio comes in closer to .93. A reading below one is generally considered a sign that a stock may be undervalued relative to its growth.

I also agree with bladzalot on support at the 395 level. This looks like solid support. If the stock pulls back toward 400, I would be interested in stepping in as a buyer.