Shares of Microsoft (MSFT - Get Report)   climbed higher in Thursday's trading session, closing up 3.3% to $129.15.

The move not only thrusts Microsoft stock to new highs but also put its market cap over $1 trillion. Up almost 40% over the past year, Microsoft is outperforming all of FAANG -- Facebook (FB - Get Report) , Amazon (AMZN - Get Report) , Apple (AAPL - Get Report) , Netflix (NFLX - Get Report) and Alphabet (GOOGL - Get Report) -- and commands the largest market cap of the group.

The company's fiscal third-quarter earnings results of $1.14 per share came in 14 cents ahead of estimates. Revenue of $30.6 billion beat expectations by a whopping $740 million and grew more than 14% year over year. Overall, the report was quite strong.

Even though the stock has a strong earnings report to rally on, some investors must be wondering how much upside could be left. Let's look.

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Trading Microsoft Stock

Two-year weekly chart of Microsoft stock.
Two-year weekly chart of Microsoft stock.

It would be pretty discouraging to see Microsoft stock give up all of its post-earnings gains and break below the 10-week moving average before finding support at $115. Yet, that would be a very attractive opportunity for short- and intermediate-term bulls.

Microsoft stock has been on a miraculously strong run, working on its seventh straight week of gains and its 11th higher week over the past 12.

That said, it hasn't tested its 10-week moving average since mid-February and is entering overbought territory according to the relative strength index, or RSI. The latter is shown by the latest blue circle at the top of the chart, but I can't emphasize enough that this measure is not a make-or-break reading. Meaning, a stock can stay overbought or oversold for far longer than some investors assume. Look at some of the past readings where the RSI was above 70. At times, such as from Q4 2018 to Q1 2019, MSFT stock maintained an elevated reading for months.

We can use this reading as an observation, but I would not use it to justify opening a short position today. Instead, use it as a consideration that the upside may be limited in the short-term.

After such a move, bulls should be more inclined to a buy a pullback rather than a breakout at this time.

Microsoft stock was in a very strong trend for more than a year from mid-2017 to mid-2018. That unraveled in the fourth-quarter meltdown last year, but with the recent rally MSFT stock is back near those old trends. They may prove irrelevant, but they are worth considering as a possible short-term ceiling.

The bottom line: Look for a pullback before initiating a new long in Microsoft stock. Aggressive bulls may consider buying into short-term uptrend support (purple line), while others may prefer a dip to the 10-week moving average. Conservative traders may wait for a test of the $115 level and possibly the 50-week moving average.

This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.