Microsoft Earnings Raise Fears Over AI Spending. Bubble Go Pop?Playing catch-up is big among the highflyers of technology as the Magnificent Seven club races to slurp up AI demand. But is AI spending going to lead to AI bonanza? It’s not that straightforward.
Microsoft (ticker: MSFT ) reported its earnings update for the spring quarter Tuesday after the closing bell. But it failed to appease investors who seem to be waking up to a reality where the billions of dollars jammed into artificial intelligence might not that easily convert into coveted profits.
The AI-optimistic large-cap behemoth has spent piles of cash on advancing its artificial-intelligence capabilities without much to show for it. Markets punished the stock in after-hours trading with shares diving as deep as 8% — a drop that later recovered but still lingered under the flatline.
“Throw Some AI in There, They’ll Love It”
You know how much CEOs love to throw AI in their earnings calls? Microsoft boss Satya Nadella praised the company’s AI efforts in the call with shareholders but even the overuse of AI couldn’t bring the feelgood factor.
Microsoft’s AI-powered cloud business, Azure, grew 29% in the three months to June, falling short of expectations and undershooting the 31% growth in the previous quarter. The company rushed to patch it up and assuage spooked investors, saying the slowdown was due in part to demand for AI running ahead of capacity.
Microsoft: Throws $55.7 billion in capital expenditures.
AI: * giggles, burps * "Thanks for the cash."
For the past three months — the company’s fiscal fourth quarter — Microsoft saw its capital expenditures balloon by almost 80% year-over-year to $19 billion. Moreover, for fiscal 2024, total capital expenditures, or how much the company spent on new stuff, hit $55.7 billion — a figure that is likely to get surpassed next year as Microsoft projects increased spending on AI.
Microsoft’s quarterly results are the latest example, after Google’s (ticker: GOOGL ) flop of an earnings report and Tesla’s (ticker: TSLA ) profit-squeezing quarter , of Big Tech’s lofty aspirations when it comes to AI. And the pushback reaction from investors shows that expectations are so high, it’s near-impossible to beat them.
Big Tech is racing to build out the infrastructure layer that will allow AI to scale so it can start churning out a profit. But the going has recently gotten tough. The Magnificent Seven club of tech mainstays washed out more than $1.5 trillion from its collective market value in the past three weeks.
The question that lingers on investors’ minds right now is how long can markets stay patient before they see revenue growth from AI materialize?
Let Us Know Your Thoughts!
With all the hype around AI, do you see a bubble in the works? Or justified no-froth, no-nonsense valuations? Share your thoughts below!
MSFTCL trade ideas
MSFT Share Price Plummets After Earnings ReportMSFT Share Price Plummets After Earnings Report, But It’s Not All Bad
Yesterday, after the main trading session on the Nasdaq, Microsoft released its second-quarter report:
→ Earnings per share: actual = $2.95, forecast = $2.93;
→ Gross revenue: actual = $64.72 billion, forecast = $64.38 billion.
Despite key figures exceeding analyst expectations, MSFT's share price plummeted, falling below the psychological threshold of $400 in after-hours trading.
Investor disappointment may have been caused by the slowdown in growth of its cloud business and significant financial investments in AI infrastructure—a long-term investment with delayed payback.
Could the decline continue?
Today in pre-market trading, MSFT's price recovered to $411, suggesting that the initial negative reaction to the report may have been overly pessimistic. Additionally, there might have been a cascade of stop-loss liquidations below $400 and the June low around $405, which seemed "secure" when the price was above $460.
Technical analysis of MSFT’s chart shows that price action in 2024 formed an ascending blue channel. If the pre-market price doesn’t change significantly, today’s opening will be just below the channel’s lower boundary. If the RSI considered extended hours data, it might indicate exiting a deeply oversold zone (similar signals in 2024 had profit potential).
If the sharp decline followed by a strong recovery signifies the liquidation of speculators (likely given the approximately 24% rise from the start of the year to mid-July), then MSFT's price could return to the blue channel and resume growth within it (channel boundaries might need adjustment).
Wall Street analysts remain positive. According to TipRanks, the average MSFT forecast is $509.42 within 12 months (above the historical high). All 26 surveyed analysts recommend buying MSFT stock.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Microsoft (MSFT) - Edition #1Macro Outlook: 🚀 Bullish 🚀
Bullish momentum is on.
Any retrace from $455 - $448
If we get a price sweep of $445 then most than likely we'll get a bigger retrace to $432 - $410 and we'll still be completely bullish.
MSFT: Just For KicksMSFT hit 395 in after hours during their earnings call, so safe to say that 390 zone is a very strong support. MSFT is now resting on another support (407), so that could be acting as resistance or support tomorrow. If MSFT falls below 404 tomorrow, expect a move to 390. If 404 holds, expect a move back to 430. Either way, there's a gap that was created, and as traders know "all gaps must be filled" (eventually).
$MSFT ending diagonal? Lower prices ahead?I was long calls of NASDAQ:MSFT into this morning and took profits in the first couple hours of trading.
I initially thought we would see a move higher to the upper resistance at $455 or potentially as high as $465, but price couldn't break that $453 level.
After relooking at the chart, it looks like we're forming an ending diagonal. If we break down from here, I could see a large corrective move back down to that $397 or $370 support level (or potentially to the lower support levels). The risk of downside was not worth the potential $2 gain from here.
There's still a chance that we break higher and tag that upper resistance, but there are signs of weakness showing on the chart to me.
We should see what direction we move by the end of the week. Decision time.
MSFT still wave 4 we now seem to be in wave3 of C The chart posted is that of MSFT the BELL WEATHER has now drop in a clear wave 3 of C down into .50% from the peak to the oct low it is also a 15.9 % decline the same decline on a pct basis as we saw from july 2023 to the low of oct 2023 . the last support under all bullish wave count would be 371 this is .382 from peak 465 to 213 low oct . it is also wave a x 1.618 to = wave C at the same point . WAS that the super cycle peak at 465 ?? I have my doubts this is why I took june 2025 calls . I would look for selling at the 200 at 401 but once we close above 422 I would look for targets in the 545 area
MSFT: Heading lower after breaking its trendline.Microsoft sells of following ER and breaks its trendline. Target levels are marked on the chart. Closing July under 400 would be a major warning sign for the remaining of the earning season.
Stocks pairs trading: MSFT vs IBMLet's examine the trade potential for Microsoft (MSFT) and IBM by analyzing their key financial metrics and recent performance to determine reasons for going long on MSFT and short on IBM.
Earnings Growth:
Microsoft: EPS next Y of 13.37%
IBM: EPS next Y of 10.57%
Microsoft’s projected earnings growth outpaces IBM, reflecting stronger expectations for future profitability. This is bolstered by Microsoft’s continuous innovations in cloud computing and software, which have shown resilience and adaptability.
Debt and Liquidity:
Microsoft: Debt/Eq of 0.42
IBM: Debt/Eq of 2.49
Microsoft maintains a significantly lower debt-to-equity ratio compared to IBM, indicating a stronger balance sheet with less reliance on debt. This financial stability makes Microsoft a safer investment, especially in volatile markets.
Profitability Metrics:
Microsoft: ROA of 19.94%, ROE of 38.49%
IBM: ROA of 6.32%, ROE of 36.36%
Microsoft demonstrates superior profitability metrics, showcasing efficient asset and equity utilization to generate profits. This positions Microsoft as a more efficient and potentially more profitable investment.
Recent News Highlights:
Microsoft has been a leader in the SIEM market, with significant advancements in cloud-native solutions like Azure Sentinel, reinforcing its position in the cybersecurity space. Recent updates include fixing critical vulnerabilities and enhancing its Microsoft Defender for Cloud platform, reflecting its proactive stance on security.
On the other hand, IBM reported solid second-quarter results with an emphasis on software-led growth. However, concerns remain over its high debt levels and the potential impacts of macroeconomic conditions on its extensive hardware and services business. IBM has also been expanding its partnerships, such as with ASMPT for advanced chip packaging and Fermilab for quantum computing initiatives.
Decision:
Long on 1 Microsoft (MSFT)
Short on 2 IBM (IBM)
The rationale for this strategy is driven by Microsoft's stronger growth prospects, better financial health, and continued innovation compared to IBM's more moderate outlook and higher financial leverage.
MICROSOFT TOP DOWN ANALYSIS STRATEGYNASDAQ:MSFT showing signs of weakness. We might see further downside in coming weeks if that counter trend line is broken, the next area we be that key support level of $345
Microsoft Corp. Uptrend Line Rejection At $418.20. 30.07.2024- Microsoft Corporation (NASDAQ: MSFT) faces an uptrend line rejection at $418.20.
- If this rejection holds, the price could rise to $448.47, with a potential further increase to $486.89 if $448.47 is breached.
- If the rejection fails, the price may decline to $394.50, with a possible drop to $375.84 if $394.50 is broken.
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Microsoft: Strangling our way throughGoing to purchase Microsoft strangles, expiry period around 4 months. 20 % +- stikes.
The idea here is that we are in for a period of volatility either way - AI is going to have to start yielding fruit soon or the investments are going to be absolutely gigantic. Given the fact that BoJ is ending its free money policy, this is getting harder to justify.
Inflation's Impact on Stock ReturnsInflation's Impact on Stock Returns
Inflation's pervasive influence on the financial landscape cannot be understated. It affects everything from everyday spending to large-scale investing. This FXOpen article dives into the intricate relationship between inflation and stock returns, unravelling the multifaceted dynamics at play. Join us as we dissect the mechanics of the impact of inflation on the stock market, offering clarity in a world of economic ebbs and flows.
Understanding Inflation
Inflation represents the rising prices of goods and services over time. While a moderate level of inflation is often viewed as a sign of a growing economy, high inflation can erode purchasing power, making everyday items more expensive for consumers. Those trading and investing during high inflation face challenges as it can diminish the real returns on investments.
Stock Returns Defined
Stock returns denote the gains or losses an investor realises from stock investments. These returns typically manifest in two ways: dividends and capital appreciation. Dividends are regular payments made by corporations to shareholders from their profits.
Capital appreciation, on the other hand, refers to the increase in a stock's price over time. It's important to note that stock returns can also be negative if a stock's price decreases. Influencing these returns are a myriad of factors, including company performance, market sentiment, and broader economic conditions.
Mechanisms: How Inflation Affects Stock Prices
Inflation, with its overarching grip on the economy, wields a substantial influence on stock prices. Understanding this dynamic is vital for traders looking to navigate the stock market during inflation. Below, we'll delve into the various mechanisms through which inflation affects stocks.
Cost of Goods Sold and Company Profitability
When there's inflation, the costs of raw materials and production generally rise. This escalation can squeeze a company's profit margins unless they pass these increased costs onto the consumers. For some industries, hiking prices might result in decreased demand, further impacting profitability. Consequently, stock prices can see downward pressure as potential investors foresee lower earnings.
Consumer Purchasing Power
Inflation erodes the value of money, meaning consumers can buy less with the same amount of money as before. This diminished purchasing power can lead to reduced consumer spending. Companies, especially those in the retail and consumer goods sector, may witness a dip in revenue. As revenues play a crucial role in determining stock value, a decline can lead to lower stock prices.
Central Bank Responses and Interest Rates
Central banks often intervene to counteract high inflation, primarily by raising interest rates. When interest rates rise, borrowing becomes more expensive for companies, which can hinder expansion plans and reduce profitability. Additionally, when inflation and interest rates rise, alternative investments like bonds become more appealing than stocks, leading to reduced demand for stocks.
By grasping these mechanisms, traders can better anticipate inflation's effect on stocks and devise strategies that account for the intricate relationship between inflation and the stock market.
Inflation's Dual Impact: Sectors and Market Caps
The impact of inflation isn't uniform across the board; it varies significantly between sectors and company sizes. Certain sectors, like commodities or energy, might benefit from rising prices, turning inflation into an advantage. Conversely, retail or consumer goods sectors might suffer as consumers' purchasing power diminishes, leading to decreased spending.
When examining company sizes, the inflation rate and stock market dynamics reveal nuanced patterns. Large-cap companies, with their diversified operations and global reach, often have better tools to hedge against inflationary pressures. In contrast, small-cap stocks, which might be more regionally focused and have fewer resources, can be more vulnerable to the negative effects of high inflation.
Historical Perspective: Inflation and Stock Market Performance
Historical data provides traders with valuable insights into the dynamics between inflation and stock market performance. For instance, during the 1970s, the US experienced a period of stagflation—simultaneous high inflation and stagnant economic growth. This era saw the S&P 500 struggle to provide real returns, largely due to soaring oil prices and tight monetary policy.
Another example can be traced to emerging markets like Argentina in the early 2000s. Faced with skyrocketing inflation rates, the stock market initially surged as locals shifted money into assets to retain value. However, long-term sustainability was challenged by economic instability and a lack of foreign investments.
Mitigation: How Traders Can Prepare for Inflation
Inflation can unsettle even the savviest traders, but with proper preparation, its challenges can be mitigated.
When investing during inflation, diversifying assets becomes paramount. Spreading investments across different asset classes and instruments can act as a buffer against inflation's adverse effects. For instance, you can trade forex or commodity, cryptocurrency*, and ETF CFDs on FXOpen’s TickTrader platform and further equip yourselves with the real-time data and tools necessary to make effective decisions.
Additionally, stocks of companies with strong pricing power, which can pass on increased costs to consumers, might fare better than others. Moreover, bonds, especially those with interest rates adjusting to inflation, can be among the best investments during inflation, offering a degree of protection to portfolios.
The Bottom Line
In understanding inflation's intricate relationship with stock returns, traders arm themselves with valuable insights. To navigate these economic complexities and optimise trading strategies, consider taking the next step: open an FXOpen account, a trusted broker that provides the tools and resources to thrive in ever-evolving financial markets.
*At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
MSFT Microsoft Corporation Options Ahead of EarningsIf you haven't entered MSFT when they bought a stake in OpenAI, the creator of ChatGPT:
Now analyzing the options chain and the chart patterns of MSFT Microsoft Corporation prior to the earnings report this week,
I would consider purchasing the 460usd strike price Calls with
an expiration date of 2024-11-15,
for a premium of approximately $13.05.
If these options prove to be profitable prior to the earnings release, I would sell at least half of them.
MSFT targets still 480 plus The chart posted is that of MSFT and we seem to be in a formed channel and a fib relationship in the channel . I will maintain my view till otherwise Best of trades Wavetimer
MSFT Paths Ahead of EarningsMSFT is set to report earnings next week as we kick off mega cap earnings season. MSFT just had a fakeout above it's major ascending channel from 2023. It has now fallen all the way back down to the bottom end and even closed below today. It can still bounce, but if not I'll be looking for a move down to $398-$400 at least.
That may provide a bounce, but if this channel does break, I would fully expect it to reject if it came back for a retest in the future. This could be a great dip buy if it holds, but I'll be waiting for confirmation and would never recommend buying options before earnings. It's an important watch either way due to the impact it has on NQ and the rest of the market.
Bullish Outlook for Microsoft Ahead of EarningsIn Microsoft, we see an open volume-imbalance gap at the top of the target range. The market tends to close these gaps sooner or later. In our experience, they are more reliable than “normal” gaps.
In view of the technical chart situation and the stable fundamentals, we are bullish on Microsoft ahead of the earnings.
Please note: The stop loss shown is merely an idea. Experience shows that market movements at earnings are very volatile. It may therefore make sense to wait until after the figures are published before taking a position.
lets make it simple with price actionSince the good entry in the second week of March 2023 price action is respecting the trend line. On friday 29 Sept our position could have been closed if we had a take profit under the volatility stop level (10 lenght 1.5 multiplier) but we should have bought again on Oct 4 2023.
How Did MSFT Stock Price React To Global Outage?How Did MSFT Stock Price React To Global Outage?
On 19th July, a global outage occurred. Numerous computers running Windows worldwide experienced "blue screens of death" (BSOD), affecting companies in different sectors, including airlines, hospitals, media, banks, and others.
The outage was caused by a CrowdStrike's Falcon Sensor update, a component of the Windows system that essentially works to protect computers from cyber threats. CrowdStrike quickly acknowledged the issue, stating that it was not a cyberattack but an update error, and suggested a solution.
According to CNBC, the large-scale outage did not significantly impact the operation of most financial markets. Representatives of the New York Stock Exchange and Nasdaq stated on Friday that they were operating despite the issues with the CrowdStrike update. The only noticeable unpleasant consequence for most was the inability to calculate the Russell stock indices, including the popular Russell 2000. However, the confusion was resolved later on Friday.
At the same time, the large-scale outage affected stock prices, including Microsoft. In pre-market trading on Friday, MSFT's price dropped below $430, but during the main session, the price managed to rise above it. As technical analysis of the MSFT chart shows, the $430 level is important – as it acted as resistance in March-May 2024. Therefore, its role as support might be justified by analysts.
Additionally, the MSFT share price is near the lower boundary of the upward channel (shown in blue), which may provide additional support. However, no one can guarantee that the mentioned support levels will lead to a subsequent bullish impulse.
On 19th July, we wrote about bearish signs on META stock charts. These are bearish aggression signs, which are concerning:
→ the price's inability to reach the upper boundary of the blue channel in early July;
→ a wide bearish gap when breaking through the median on 17th July.
Wall Street analysts remain positive for now. According to TipRanks, the average forecast for MSFT is $504.12 (+15.33% from the current price) over the next 12 months.
Microsoft's Q2 earnings report, scheduled for release on 30 July, has the potential to significantly alter the balance of sentiments.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Top 7 Books to Learn Advanced Technical Analysis for StocksTop 7 Books to Learn Advanced Technical Analysis for Stocks
Mastery of advanced technical analysis is one of the factors that separates casual traders from experienced ones. Financial markets are not simple, so it’s important to understand the subtleties of price movements and chart patterns.
This FXOpen article is best suited for experienced traders who already have basic trading knowledge but are looking to delve into advanced technical analysis. We’ve compiled a list of the 7 best books to learn stock trading that explain its complexities and offer invaluable insights and strategies to potentially enhance your trading.
What Are the Best Books to Learn Stock Trading?
Typically, sketchy knowledge from blogs or YouTube videos won’t be enough to allow someone to understand and improve technical analysis. Then, people turn to reading, trying to find the best books to learn the stock market that are available.
The best stock market books are characterised by their practicality, expertise, and ability to provide valuable insights for investors and traders. They often cover a range of topics and are authored by experienced professionals in the field. Below, you’ll see a list of 7 books and their descriptions.
1. The Art and Science of Technical Analysis: Market Structure, Price Action, and Trading Strategies
Author: Adam H. Grimes
This book is a pioneering work that connects an academic view of markets, technical analysis, and effective trading. It explores why randomness dominates markets most of the time but not always. The author focuses on how technical analysis can be used to identify statistically validated patterns in certain market conditions.
In reviews of the work, readers state that the book demolishes TA misconceptions and provides insight into the psychology of market players. The book is supported by extensive research and helps readers recognise technical patterns.
2. The Definitive Guide to Point and Figure
Author: Jeremy Du Plessis
One of the top books on stock trading is the work of Jeremy Du Plessis. This book is dedicated to technical analysis and Point and Figure charting. It includes a detailed explanation of the history and development of the technique from its invention to the present day and covers the construction of graphic patterns, the reasons for their creation, and ways of interpreting them. According to reviewers, the book provides knowledge that gives you an edge. After reading it, you will no longer look at price targets and risk-reward ratios like you used to.
3. Elliott Wave Principle: Key to Market Behavior
Authors: Robert R. Prechter Jr., A.J. Frost, Charles J. Collins
This book is a worthy reference for technical traders. It gives a good understanding of the Elliott wave principle, a form of technical analysis that traders use to analyse financial market cycles and trends. It’s not for amateurs, but experienced traders love it.
The book is rather specialised as it contains material on one narrow topic, so it’s not a complete guidebook to mastering trading. Nevertheless, it’s very informative and concentrated. Reviewers note that the book teaches readers how to apply Elliott wave theory not only on stocks but also on commodities and forex markets.
4. Encyclopedia of Chart Patterns
Author: Thomas N. Bulkowski
This book is dedicated to trading on news and significant events, including quarterly earnings announcements, retail sales, and stock upgrades and downgrades. It offers empirical data illustrating the effectiveness and ineffectiveness of the patterns.
The Bulkowski Encyclopedia has been a bestseller for a long time, and now the author has released an updated, improved version and added many new patterns and strategies, as well as updated market statistics. Everything you will read in the theoretical part is backed up with figures and calculations and validated.
5. Technical Analysis Using Multiple Timeframes
Author: Brian Shannon
This is one of the books for the stock market dedicated to many aspects of trading at once. You will learn how you may enter established trends with low risk, recognise and take advantage of cyclical capital movements in all markets, evaluate the potential of a trade using technical analysis, and much more.
Reviewers mention that it provides powerful insights into how to use different timeframes to determine trends, confirm signals, and manage risk. The book is not complicated, but it is suitable for experienced traders, as it collects and systematises a huge block of information about the market.
6. Beyond Candlesticks: New Japanese Charting Techniques Revealed
Author: Steve Nison
This book provides a detailed analysis of Japanese candlestick charting techniques and how to use them in technical analysis. It discusses how to use candlestick patterns to identify trends, confirm signals, and manage risk.
Readers value its step-by-step instructions, detailed charts and graphs, and clear guidance on tracking results. Moreover, the book helps readers understand the psychology of traders in the stock market and the logic behind their decisions.
7. Effective Trading In Financial Markets Using Technical Analysis
Authors: Ashish Kyal, Smita Roy Trivedi
Along with other books in this list, the work of Ashish Kyal and Smita Roy Trivedi explains how to use technical analysis in financial markets. It covers technical analysis tools, backtesting, and algorithmic trading in detail. It teaches readers how to use technical indicators and chart patterns, confirm signals, and manage risk.
Readers say that it’s written in simple language, and there are multiple examples, case studies, comparisons, and figures for different assets and markets. Unlike many classic trading books, this work focuses a lot on the Indian market. It will be useful to those who are interested in that region.
Final Thoughts
It’s not an easy task to list the best books for trading in the stock market. If everything is clear in terms of materials for those who are just entering the world of trading, advanced books are harder to choose.
Experts say that if you already have background knowledge, you can select books that either combine and systematise information about trading or deal with one specific area in detail. The more you read, the more experience and skills you will gain. And if you want to put your knowledge into practice, you can open an FXOpen account. Log in to the TickTrader trading platform to see real-time asset charts and try out your strategies.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
MSFT: A Potential Buy Amid Market Volatility.Given the current technical indicators and market conditions, here is a speculative trading strategy for MSFT:
Long Position:
Entry Point: Consider entering a long position if the price approaches the strong support level around $418.53.
Price Target: Aim for the resistance level at $455.40 initially, with a potential to reach $492.85 in the medium term.
Stop Loss:
Place a stop loss at $410 to mitigate potential losses.
Short Position:
Entry Point: If the stock breaks below the $418.53 support level, consider a short position.
Price Target: Target the next support level at $390.10.
Stop Loss: Set a stop loss at $430 to limit potential losses.
Examining the candlestick patterns, MSFT has displayed a series of red candles with significant upper wicks, suggesting persistent selling pressure. The price action reflects a bearish sentiment in the short term, but the long-term trend remains bullish, supported by the company’s robust fundamentals and continuous growth in its cloud computing division, Azure.
TW Fib Dragon LONG Setup MSFTGolden Zone Entry - 418.71
Stop Loss - 388.03
Options: 1 Strike OTM 1-2 Weeks out Adjust depending on your risk - I will update yall when I get filled
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MSFT expected correction and buying areaDue to a piercing candle pattern and completion of 5 wave impulsive Elliott wave pattern, I expect Microsoft to correct to price levels below in black from where I expect it to rally to new all time high
