Microsoft’s Momentum Could Be Fading
Microsoft has sputtered for months, and now some traders may see downside risk.
The first pattern on today’s chart is the pair of bearish gaps after earnings.
The software giant rebounded quickly in November, returning above its 21-day exponential moving average (EMA) and 200-day simple moving average (SMA).
Contrast that with January 30’s drop, when prices stayed under both moving averages. That session’s opening price around $418.77 has also emerged as resistance this month.
Second, the 50-day SMA is nearing a potential “death cross” below the 200-day SMA. That’s a potentially bearish long-term signal.
MACD has been negative and the 8-day EMA is below the 21-day EMA. Those are potentially bearish short-term signals.
Next, the stock has been trying to hold the November lows around $405. But if that level breaks, the August low under $386 may come into play.
Finally, MSFT has traded an average of 463,000 options contracts per day in the last month. (It’s the eight most active underlier in the S&P 500 in that time, according to TradeStation data.) That may create opportunity for options traders to position for a potential move toward the 52-week low.
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Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options or futures); therefore, you should not invest or risk money that you cannot afford to lose. Online trading is not suitable for all investors. View the document titled Characteristics and Risks of Standardized Options at https://www.TradeStation.com/DisclosureOptions. Before trading any asset class, customers must read the relevant risk disclosure statements on https://www.TradeStation.com/Important-Information/. System access and trade placement and execution may be delayed or fail due to market volatility and volume, quote delays, system and software errors, Internet traffic, outages and other factors.
Securities and futures trading is offered to self-directed customers by TradeStation Securities, Inc., a broker-dealer registered with the Securities and Exchange Commission and a futures commission merchant licensed with the Commodity Futures Trading Commission). TradeStation Securities is a member of the Financial Industry Regulatory Authority, the National Futures Association, and a number of exchanges.
Options trading is not suitable for all investors. Your TradeStation Securities’ account application to trade options will be considered and approved or disapproved based on all relevant factors, including your trading experience. See https://www.TradeStation.com/DisclosureOptions. Visit https://www.TradeStation.com/Pricing for full details on the costs and fees associated with options.
Margin trading involves risks, and it is important that you fully understand those risks before trading on margin. The Margin Disclosure Statement outlines many of those risks, including that you can lose more funds than you deposit in your margin account; your brokerage firm can force the sale of securities in your account; your brokerage firm can sell your securities without contacting you; and you are not entitled to an extension of time on a margin call. Review the Margin Disclosure Statement at https://www.TradeStation.com/DisclosureMargin.
TradeStation Securities, Inc. and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., both operating, and providing products and services, under the TradeStation brand and trademark. When applying for, or purchasing, accounts, subscriptions, products and services, it is important that you know which company you will be dealing with. Visit https://www.TradeStation.com/DisclosureTSCompanies for further important information explaining what this means.
The first pattern on today’s chart is the pair of bearish gaps after earnings.
The software giant rebounded quickly in November, returning above its 21-day exponential moving average (EMA) and 200-day simple moving average (SMA).
Contrast that with January 30’s drop, when prices stayed under both moving averages. That session’s opening price around $418.77 has also emerged as resistance this month.
Second, the 50-day SMA is nearing a potential “death cross” below the 200-day SMA. That’s a potentially bearish long-term signal.
MACD has been negative and the 8-day EMA is below the 21-day EMA. Those are potentially bearish short-term signals.
Next, the stock has been trying to hold the November lows around $405. But if that level breaks, the August low under $386 may come into play.
Finally, MSFT has traded an average of 463,000 options contracts per day in the last month. (It’s the eight most active underlier in the S&P 500 in that time, according to TradeStation data.) That may create opportunity for options traders to position for a potential move toward the 52-week low.
TradeStation has, for decades, advanced the trading industry, providing access to stocks, options and futures. If you're born to trade, we could be for you. See our Overview for more.
Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options or futures); therefore, you should not invest or risk money that you cannot afford to lose. Online trading is not suitable for all investors. View the document titled Characteristics and Risks of Standardized Options at https://www.TradeStation.com/DisclosureOptions. Before trading any asset class, customers must read the relevant risk disclosure statements on https://www.TradeStation.com/Important-Information/. System access and trade placement and execution may be delayed or fail due to market volatility and volume, quote delays, system and software errors, Internet traffic, outages and other factors.
Securities and futures trading is offered to self-directed customers by TradeStation Securities, Inc., a broker-dealer registered with the Securities and Exchange Commission and a futures commission merchant licensed with the Commodity Futures Trading Commission). TradeStation Securities is a member of the Financial Industry Regulatory Authority, the National Futures Association, and a number of exchanges.
Options trading is not suitable for all investors. Your TradeStation Securities’ account application to trade options will be considered and approved or disapproved based on all relevant factors, including your trading experience. See https://www.TradeStation.com/DisclosureOptions. Visit https://www.TradeStation.com/Pricing for full details on the costs and fees associated with options.
Margin trading involves risks, and it is important that you fully understand those risks before trading on margin. The Margin Disclosure Statement outlines many of those risks, including that you can lose more funds than you deposit in your margin account; your brokerage firm can force the sale of securities in your account; your brokerage firm can sell your securities without contacting you; and you are not entitled to an extension of time on a margin call. Review the Margin Disclosure Statement at https://www.TradeStation.com/DisclosureMargin.
TradeStation Securities, Inc. and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., both operating, and providing products and services, under the TradeStation brand and trademark. When applying for, or purchasing, accounts, subscriptions, products and services, it is important that you know which company you will be dealing with. Visit https://www.TradeStation.com/DisclosureTSCompanies for further important information explaining what this means.
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.