Microsoft Corporation develops, licenses, markets, and supports software, services, and devices worldwide. The company’s Devices and Consumer (D&C) Licensing segment licenses Windows operating system and related software; Microsoft Office for consumers; and Windows Phone operating system. Its Computing and Gaming Hardware segment provides Xbox gaming and entertainment consoles and accessories. The company’s Phone Hardware segment offers Lumia Smartphones and other non-Lumia phones. Its D&C Other segment provides Windows Store, Xbox Live transactions, and Windows Phone Store; search advertising; display advertising; Office 365 Home and Office 365 Personal. The company’s Commercial Licensing segments licenses server products, including Windows Server, Microsoft and related Client Access Licenses; Windows operating system; Microsoft Office for business; and Skype. Its Commercial Other segment offers enterprise services, including premier support services and Microsoft consulting services; commercial cloud comprising Office 365 Commercial and other Microsoft Office online offerings.
Take a look at the 1-year chart of Microsoft (Nasdaq: MSFT) below with my added notations:
MSFT has been trending consistently higher for the entire last year, and during the last 8 months, the stock has also formed a clear trendline of support (green). In addition, the stock had also created at 52-week high resistance level at $45.50 (blue) in July and August. At some point MSFT was going to have to break one of those two levels, and late last week the stock broke through resistance to a new high.
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The Tale of the Tape: MSFT broke though its $45.50 resistance, which was also a new 52-week high. A long trade could be made on a pullback down to the $45.50 level with a stop placed below that level. A break back below $45.50 should lead to a fall down to the trendline support., which is currently approaching $44.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach