Microsoft - Renko Analysis 05/04

Microsoft paints an interesting picture. After a prolonged consolidation, price made a false break out to the upside (validated by declining volume) and plunged lower breaking the lower channel of the consolidation. In this analysis, I use Elliott waves (made it as simple as possible) to figure out future price action. Based on my EW count, I think we have seen the termination of wave 3. I believe the EW counts to be valid based on the following rules:

• Wave 2 should not retrace 100% of wave 1 - Check
• Wave 3 typically reaches 1.618 of wave 1 - Check
• Wave 4 retraces to 38.2% of wave 3 - In progress
• Wave 5 yet to happen

What validates this scenario is the underlying pivot points (aka support/resistance levels). Even without EW count, we have a key support level coming in at 31.97. This coincides with 38.2% of wave 3, giving a target around 30.38. This level also forms the top of the channel. So logically, a retest of the top of this channel (which was previously resistance) could see price push higher.

Microsoft (MSFT) - Renko Charts with Elliott Wave Analysis

Wave 5 targets: Wave 5 usually moves the same length as wave 1. So if we go long from 30.38, or from 31.97, the targets would be (15.3 points) which is: 45.68 or 47.27

Targets:

• If wave 3 is indeed complete (at 41.06), short to 31.97/30.38
• Long from the above levels targeting 45.68 - 47.27 (with partial profit booking at 41.06)