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Trade Microsoft Stock's Promising but Shaky 'Golden Cross'

Microsoft (MSFT) has been a longtime benchmark stock, given its membership in all three major equity averages, the Dow Jones Industrial Average (INDU) , the S&P 500 and the Nasdaq Composite (NDAQ) .

Microsoft has a gain of 3.1% year to date and is up 19.1% since setting its June 27 post-Brexit vote low of $48.04. The stock is thus shy of bull market territory, which calls for a gain of at least 20%. The 2016 high of $58.70, set on Aug. 26, is just below its tech bubble peak of $59.97, set in December 1999.

The software industry as measured by the iShares North American Tech Software ETF (IGV) is up by 6.8% year to date. The exchange-traded fund set its multiyear high on Oct. 10. This ETF of 58 components is in bull market territory, up 35% since Feb. 8. Microsoft is the second-largest component of this software ETF.

The daily chart for Microsoft shows the stock above a "golden cross" since Aug, 10. This bullish chart formation occurs when the 50-day simple moving average crosses above the 200-day simple moving average and signals that higher prices lie ahead.

The weekly chart shows that Microsoft ended last week positive but overbought, which increases the odds that the company will have a positive reaction to earnings. However, today's chart shows negative divergences before earnings.

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