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Point & Go Figure: Microsoft Throws a Party, But Will Anybody Come?


It's my party, and I'll cry if I want to.


What if Microsoft (MSFT) threw a party but nobody showed up? How embarrassing. Yesterday the stock gave a point and figure buy signal for the first time in two years. To celebrate, Bill put together a last minute party in Redmond at the Microsoft compound and invited everyone from Alan Alda to Jeff Zucker.

Opening shot: Over next to the punch bowl there's Bill Gates hanging out in a blue ruffled tuxedo, checking his watch every couple of minutes as Madonna's "Lucky Star" echoes in the empty Microsoft Corporate Gymnasium. He paces a bit. Where is everyone? Finally, Steve Ballmer walks into the gym and makes his way over to Bill.

Bill: Steve! (he shouts his name, his relief palpable.) How are you? It's really, really, just great, really, really great to see you.
Steve: Good, good, doing good Bill. (Shakes his hand, smiles and takes a long look around the empty gym as he fills his punch glass.
Bill: (Nodding his head to the music.) Love this song, man.
Steve: Oh yeah, me too. Cyndi Lauper right?
Bill: Madonna.
Steve: (Smacking his forehead) Oh, right, Madonna. Sure, love Madonna.
(An awkward silence drifts between the two men.)
Bill: I just want to... (Almost simultaneously, interrupting) Steve: You know....
(Both laugh.)
Bill: I'm sorry, go ahead.
Steve: No you go, I interrupted you.
Bill: Well, I just wanted to say, "thanks."
Steve: What? Get out. We're friends. There's no "thanking."
Bill: No, I know but I just, you know, I appreciate your being here is all.
Steve: Bill, it's Saturday night. If I wasn't here I'd be holed up in my apartment alone, drinking too much beer...
Bill: (finishing his sentence) and hacking Google?
Steve: Dude, I really hate those guys.
Bill: Tell me about it. They're like the result of some kinda weird experiment - like if you took Steve Jobs and a couple of KGB agents, gave them a laptop computer and told them to hack into a state fair.
Steve: You know, Bill, what really gets me is that we were once just like them.
(Bill thinks this over a moment and sips some punch)
Bill: What happened to us?
Steve: What happened? I'll tell you what happened. We grew up. We got rich. Sure, we made ourselves somewhat indispensable, but let's face it: kids take us for granted these days. We're not hip. Roll back 25 years and put yourself in their shoes. To them, we're like a Slinky manufacturer was to us, or Etch-a-Sketch.
Bill: Etch-a-Sketch, those are cool!
Steve: Ok, yeah, bad example, they are cool, but still, you know what I'm saying.
Bill: Oh, c'mon. Look at the Stones, man, they're still cool!
Steve: The Rolling Stones are cool to us, to old guys. Watch that show on Fox, The O.C. Those are Google kids. They're not Microsoft kids.
Bill: You make it sound like we're selling sweaters and blue jeans here, Steve. People need technology. They need us, not some glorified search engine that spies on them.
Steve: I used to think that too, but look at their stock.
Bill: Look at our stock, we're breaking out, man, I can feel it! (Looking at his watch.) Where IS everybody?
Steve: I don't know, I just feel like we're playing catch up. And everybody else is at a different party that started earlier.

Ok then. Enough of that. Let's leave Bill and Steve to their lonely party and take a look at what the charts are telling us about Microsoft.

Microsoft (MSFT) point and figure chart

Yes, MSFT has "broken out." But, for the most part, so has everything else on the Nasdaq. A look at a point and figure chart plotting Microsoft vs. the NDX shows this relationship very clearly.

MSFT vs. NDX, relative percentage change chart

This chart shows the Microsoft dilemma. The stock has been an underperformer versus the Nasdaq 100 for more than two years now. So it's playing a bit of catch-up as the NDX, which broke out last week, drags the former Tech general up with it. What this says is that investors who are in love with Microsoft are in love with an underperforming stock. Even as a trade, the stock is statistically overbought here and vulnerable as it just registered a DeMark TD-Sequential 13.

So, technically, Microsoft is throwing a party, but it remains to be seen whether anyone is going to bother showing up.

No positions in stocks mentioned.

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