It has been a good year for Microsoft Corp.(MSFT) stock. It managed to climb as high as $56.76 on December 17th, which is not too far away from its all-time high, registered in 1999. But 2016 is almost here, so should we expect the same performance from Microsoft stock next year? If we simply extrapolate the current trend into the future, then the answer would inevitably be positive. However, the Elliott Wave Principle, a far more advanced method of analysis, allows us to see the bigger picture. The weekly chart, given below, explains why Microsoft might be headed for a disappointment in 2016.
Just like many other US stocks, Microsoft bottomed in March 2009 and has been recovering ever since. The Wave principle postulates that trends move in five-wave sequences, called impulses. Keep that in mind and take a look at the chart again. It seems that the whole advance since 2009 is an unfinished impulse. Wave (1) ended in April 2010 and gave the start of wave (2), which appears to be a corrective combination. Wave (3) started in November 2011. It has a pretty clear five-wave structure, suggesting the bulls might be getting tired, because every impulse is followed by a three-wave correction in the opposite direction. If this is the correct count, we should prepare for wave (4) to the south. It has the potential to take Microsoft back to the area near $45.00. In other words, the stock could be expected to lose nearly ten dollars a share, before the bulls return.
