Trade Microsoft Using Bollinger Bands

Updated from Jan. 28

By Stockpickr Guest Columnist Ira Krakow

In "Trading BofA Using Moving Averages," I discussed how moving-average technical analysis can pinpoint short-term trading opportunities even in a beaten-up stock such as Bank of America(BAC Quote).

In this article, I will introduce Bollinger bands, a more-sophisticated technical analysis tool based on the moving average. Bollinger bands can show when the stock price is ready to break out, either sharply upward or downward, or whether the price is lazily churning without any clear movement either up or down.

Let's use this tool to determine if Microsoft(MSFT Quote) is in a serious downtrend or if recent news has created a buying opportunity.

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In midday trading, Microsoft was recently trading at $17.25 per share (down 1.82% for the day; down 11.16% year-to-date).

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