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Microsoft Earnings Preview: Chart Has Two Major Areas on Watch

Microsoft stock is set to report earnings after the close on Tuesday. Here are the key levels to know now.

It’s been a rowdy couple of days in the stock market and the mega-cap tech giants weren’t able to withstand the selling pressure either.

Apple  (AAPL) - Get Apple Inc. Report and Microsoft  (MSFT) - Get Microsoft Corporation Report were hit hard as the Nasdaq was in liquidation mode

Impressively though, despite falling 4.9% at the low yesterday, the index was able to close higher on the day. Apple and Microsoft were able to too. 

However, now earnings are on deck for Microsoft.

The tech conglomerate is due to report after the close on Tuesday and given the action we’ve seen in the market, it will be a highly watched event.

Not just because it’s Microsoft and it commands a $2.2 trillion market cap, but because a positive reaction from the stock could help stabilize the Nasdaq, the weakest of the bunch when it comes to the indices.

When I look at the chart, there are two main levels that stick out. Let’s examine them.

Trading Microsoft Stock

Daily chart of Microsoft stock.

Daily chart of Microsoft stock.

It’s not surprising we have an inside day thus far, with Microsoft’s trading range for Tuesday completely contained within Monday’s wide range.

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It’s trading below the 200-day moving average, but above the 50-week moving average and the weekly VWAP measure.

Further, it’s trading above the fourth-quarter low, which comes into play at $280.25 and near the weekly VWAP. This area is one of the two major areas I’m watching for after Microsoft’s report.

You can throw in Monday’s low too and call the downside area to watch $276 to $280.

While a wide zone typically, that doesn’t seem to be the case in this tape. A break of Monday’s $276.05 low and a reclaim could give us a potential bullish reversal.

A break of $276 and no reclaim could spell trouble for Microsoft stock.

The other main level I’m watching is on the upside and comes into play between $300 and $305.

$300 is a nice round-number price and is psychologically relevant, while $305 was the prior breakout level. In between both prices is the declining 10-day moving average — and we can’t forget that the current trend is to the downside.

To clear all of these levels and short-term trend resistance would be a huge win for the bulls and like I said at the top of the article, it could be enough to help stabilize the Nasdaq. 

The key is closing above these marks too, not just gapping up to them and fading. Like a potential reversal we talked about on the downside, it's also possible on the upside. 

So that’s it in a nutshell: Watch $276 to $280 on the downside and $300 to $305 on the upside.