Stock Of The Day: Microsoft's Upcoming Earnings Could Signal Market Shift At Key Resistance

Microsoft Corporation‘s MSFT upcoming earnings report on Tuesday could influence the entire market. Traders will be watching how the stock navigates around the important $432 level.

If the stock can't make it above this potential resistance, it could lead to another move lower. It could also bring the entire technology sector down along with it. This is why it is our Stock of the Day.

As you can see on the chart, this level was resistance in March and May. Each time the stock rallied to this price, the sellers overpowered the buyers and pushed it lower.

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But then in June the resistance was broken and Microsoft moved higher. When this happened, some of the traders and investors who sold at the resistance came to regret doing so.

A number of them decided to buy their shares back if they ever returned to the same price they were sold for. So, when this eventually occurred, these remorseful sellers placed buy orders. The large concentration of these orders caused support to form.

This put a floor under the price and resulted in a small rebound. Seller's remorse can convert resistance into support.

But then the support was broken. Now traders will be looking for insight into the future direction of the stock by seeing if this support converts back into a resistance level.

This could be due to buyer’s remorse, which can transform previous support levels into resistance.

Some of the investors and traders who purchased shares while they were at support thought they made a smart decision when the price moved higher. But this move didn't last long. MSFT reversed and broke back below the support.

Now the price is lower. And many of those who bought the stock while it was at support now regret doing so and vow to get out.

But they don't want to lose money.  So, they decided that if the price eventually gets back up to their buying price, they will sell. If there are enough of these sell orders, it will convert what was support back into resistance.

If this happens, it could be an early sign that a new downtrend is forming. And if Microsoft trends lower, it will put pressure on the entire technology sector.

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