Chart Shows Where MSFT Stock is Going Next
For loyal shareholders of Microsoft Corporation (NASDAQ:MSFT) who struggled through the lean years under former CEO Steve Ballmer, the recent breakout by Microsoft stock is a deserving win. Microsoft is no longer an aging elephant, but rather an agile gazelle. Microsoft is now all about growth in the next technologies.
You can thank Microsoft CEO Satya Nadella for making the company relevant again. The new Microsoft is all about the cloud, social media, gaming, and innovative apps for wireless and tablets.
MSFT stock looks bullish on the chart after establishing a new 52-week high of $58.50 on August 15.
Chart courtesy of StockCharts.com
The chart shows a bullish upside trading gap by Microsoft at the opening from $54.00 to $56.00. Upside gaps are viewed as bullish signs pointing to additional upside moves down the road.
A bullish “golden cross” just materialized with the 50-day moving average (MA) crossing above the 200-day MA on decent volume.
The breakout of MSFT was driven by strong relative strength and a rising moving average convergence divergence (MACD). The MACD for MSFT stock has been in an upward trend since early May. Be careful, however, as the MACD appears to indicate some sideways trading. The last time the MACD flattened out was in June, when MSFT traded down to $48.00.
We could see some hesitancy in the near term if MSFT stock fails to break above strong technical resistance at the physiological $60.00 level. Should Microsoft fail at that time to break $60.00, we could see a downward move toward $54.00, which was the level prior to the trading gap by MSFT.
The Bottom Line on MSFT Stock
As a trader, there are numerous strategies you can employ. I like using options as a leveraged and risk-managed trade.
I’m not suggesting that you do the same, but there are ways to use options. For example, if you feel that Microsoft can break higher, you can use “call options.” I like in-the-money calls, as they give me a lower break-even level for the stock to achieve. If you are really bullish on Microsoft, you can play via out-of-the-money calls.
For a more conservative, controlled MSFT call option trade, you can use “call spreads.” This strategy limits the upside gains, but it also costs less to initiate.
Now, if you believe that Microsoft will relapse toward $54.00, you can sell “put options” with a strike at $55.00, depending on how much you want to risk. For instance, selling a $55.00 put on MSFT means you can buy the stock on a dip to $55.00.
The bottom line is that there are numerous ways to play Microsoft stock, whether shares go up or down. In options, you are only limited by your creativity.