Morgan Stanley Is Staging a Powerful Breakout -- Here's How to Trade It Now

Shares of Morgan Stanley are surging following this morning's strong earnings report.
By Gary Morrow ,

Shares of Morgan Stanley (MS) - Get Report  surged following this morning's strong earnings report. The stock opened the session with an impressive upside gap that lifted it to fresh six-month highs. Volume driving the 2% advance is running very robust, and and the stock will likely end the day with its heaviest upside volume session of 2016.

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This morning's breakout gap extends Morgan Stanley's post-Brexit rally to over 25%. This powerful rally, which began after shares reached key support near the April low, appeared to have stalled near the upper band of the stock's five-month range. MS had left behind key monthly highs near the $28 area during this phase. The first post-February top in this zone came in April. A month later, MS reached a higher high but was again turned away as the consolidation continued. After the Brexit panic selloff, the recovery move that followed reached the $28 area last week. As earnings neared, it looked like a fourth monthly high was in place between $27.50 and $28.30.

Following today's rally, Morgan Stanley now has a very solid support zone in place between $28.50 and $27.50. Investors should consider the stock a low-risk buy in this zone as a new bull leg develops. A close back below $27 would drop Morgan Stanley back, indicating that more basing is ahead before the stock returns to rally mode. On the upside, a logical initial target is the 2015 low of $30.15. A pullback from this key level is likely.

Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long MS.

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