Once upon a time, Microsoft (Nasdaq: MSFT) was a high flying tech stock that presented the kind of return investors dream about. If you had purchased Microsoft stock at its high in January 1994, and sold it at its high six years later, you would have experienced a 2,100% gain- that’s right, 2,100% in six years. Purchasing 1,000 shares at the high in January 1994 would have cost you $2,000 and at the high in December 1999, those same shares were worth $44,000.

With apologies to S.E. Hinton, that was then… this is now. Flash forward 15 years and we see that Microsoft stock has actually had a pretty good stretch over the last year and half with a gain of 65%. Sure 65% return doesn’t sound anywhere as sexy as 2,100%, but considering how Microsoft moved sideways from 2002-2006 and again from 2010-2011, shareholders are probably pretty happy with how the stock has performed over the last 18 months.

microsoft-stock-chart

All of the prices mentioned up to this point are adjusted for splits and dividends and there have been five two for one splits since the company went public in June 1992. And here we are, almost 15 years since that all-time high was reached and Microsoft—after all those dividends and splits, and the stock is finally closing in on that all-time high.

Looking at the monthly chart, we see that the stock is within 6% of its all-time high. It hasn’t been this close to the high since March 2000. Unfortunately, we also see from the monthly chart that the stock hasn’t been this overbought since December 1999.

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Because of their so-so performance for most of the 2000’s, the sentiment toward Microsoft has gone from overly bullish to middle of the road at best. The short-interest ratio is at 2.9 which is slightly skewed toward the bullish side. The put/call ratio is currently at 0.65 and that is in the 48th percentile for the past year—you can’t get much closer to the middle of the road than that. The biggest change in the sentiment toward Microsoft has come from the analyst ratings. Unfortunately I don’t have the ratings from 2000 through 2004, but I do remember writing an article back then and I want to say that approximately 85% of the analyst ratings were at a “buy” or higher. The current ratings show 11 “buy” ratings, 20 “hold” ratings and three “sell” ratings. Oh how the mighty have fallen—out of favor.

While the lower sentiment ratings make Microsoft stock considerably more attractive, sentiment alone is does not provide enough ammunition to buy a stock. The technical picture provides some doubt due to the impending resistance at $44 and the overbought level on the 10-month RSI.

The fundamentals aren’t really worth mentioning as most of them are average at best. So how do you play Microsoft stock at this time? I would wait for a pullback before adding the stock to my portfolio. Getting out of overbought territory on the monthly chart and seeing that 10-month RSI down around the 50 level would be enough for me.

The One Company You’ve Never Heard of – But Smartphones Couldn’t Exist Without

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Published by Wyatt Investment Research at