Flags in Technology Stocks Send Mixed Signals

• Posted by Greg Harmon
• on July 18th, 2011

Everybody knows that the checkered flag is waved for the winner of a race and that a red flag is a sign of some kind of problem. Everyone also knows that in technical analysis a bull flag is bullish and a bear flag is bearish right? Not so fast, that is generally the case in a trending market. A bull flag in an uptrend will tend to continue higher, and a bear flag in a downtrend will tend to continue lower. But in a consolidating market? Below are the charts of three big name technology stocks, Microsoft (ticker: $MSFT), Citrix Systems (ticker: $CTXS) and Salesforce.com (ticker: $CRM) that are in flags, with interesting outcomes on the horizon that could be in either direction.

Microsoft, $MSFT

Microsoft, $MSFT, is in a bull flag between 26.50 and 27 after rising from a base at just under 24. If it can break the flag higher then it has a Measured Move (MM) to 29.50, just above the January high. But it could also break the flag lower and fall to support at 24.80-25 and 24 below that. The earnings report on Thursday after the market could be the catalyst.

Citrix Systems, $CTXS

Citrix Systems, $CTXS, is in a bear flag but just over support of the breakout from the rising wedge that happened in April. Even though it is a bear flag it is a potential long set up. If it can break above the flag over 77 then look for it to move higher to 80 and then potentially 83.50. If it breaks down below the support line then it looks as though the support at 67-67.50 may hold.

Salesforce.com, $CRM

Salesforce.com, $CRM, is in a bull flag. After moving higher from a base at 137 it tested 160 and then started the flag. If it can get back above 155, breaking the flag higher it will have made a higher low after a higher high confirming the trend up and a target on a MM to 177. However a break down below 150 would call for a move lower to the 142 and then 137 area.

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