Microsoft Stock Faces Potential 20% Pullback as Chart Signals Warning

After a stellar year driven by AI hype and solid earnings, Microsoft's chart is starting to show cracks. The stock recently tried pushing past $550 but couldn't hold, forming what looks like a double-top—a classic red flag that often signals a reversal. With tech valuations stretched and investors getting nervous about how far this rally has run, Microsoft might be due for a breather.

What the Chart Is Saying

In a recent post, Ted pointed out a few warning signs worth paying attention to:

• Unfilled Gap ($400–$410): This price zone from an earlier rally never got retested—and gaps like this tend to pull prices back eventually
• Double-Top Near $550: The stock's failure to break higher around this level suggests momentum is fading
• Bearish Projection: The chart shows a potential move down toward that gap zone, which lines up with a 10–20% correction
• Buyer Exhaustion: Recent candles have been shorter with upper wicks, hinting that buyers are losing steam

Unless Microsoft can quickly reclaim higher ground, these signals suggest a pullback might be coming.

The Bigger Picture

Microsoft's moves have tracked closely with the broader market. For months, mega-cap tech stocks have carried major indexes to new highs on AI excitement and strong earnings. But now? Investors are getting cautious. With interest rates still elevated and profit margins under pressure, even solid companies like Microsoft aren't immune to short-term corrections.

If a broader market pullback happens, Microsoft could find initial support around $500–$510, with the $400–$410 gap representing a deeper—but technically healthy—reset within the long-term uptrend.

The big question: is this just a temporary dip or the start of something bigger?

A drop below $520 would likely confirm more downside ahead. On the flip side, if Microsoft bounces back above $550 with strong volume, the bulls might take control again. For now, traders are watching that unfilled gap highlighted—a level that's historically acted as both a magnet and support in Microsoft's past cycles.