How to Trade Microsoft When It Reports Earnings

Microsoft is hovering near its highs ahead of earnings. Let's look at the charts to see what levels are significant after the report.
Author:
Updated:
Original:

Microsoft  (MSFT) - Get Report has been strong, hitting new all-time highs earlier this month as the stock accumulated a market cap north over $1.6 trillion.

However, shares were pulling back nicely ahead of earnings, which are due up after the close of trading on Wednesday.

That pullback was ideal for investors as it helped to tamp down expectations a bit and kept the stock from storming higher into earnings. With Monday’s 4.3% rally though, Microsoft stock is flirting with another move back toward the high.

Still, the stock continues to trade constructively as bulls remain in control. In fact, that’s true among many in the tech space, with Apple  (AAPL) - Get Report, Amazon  (AMZN) - Get Report and the Nasdaq all recently hitting new all-time highs.

Let’s look at where this stock can trade once the earnings results hit the wires.

Microsoft, Apple and Amazon are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells MSFT, AAPL or AMZN? Learn more now.

Trading Microsoft Stock

Daily chart of Microsoft stock.

Daily chart of Microsoft stock.

Look at the way Microsoft stock rallied up to its recent high of $216.38 before pulling back over the course of about seven trading sessions.

Shares ultimately found support near $203, which happens to be the 123.6% extension, while also holding up around the 10-day and 20-day moving averages. I would have liked to see shares congregate a little longer near this area or even decline further into the print.

With Monday’s pop to the 138.2% extension and within a stone’s throw of the prior highs though, traders are wondering what levels are relevant after the company reports its fiscal fourth-quarter earnings results.

On the upside, look to see if Microsoft can rotate over the current high near $216.50. Above could eventually put the 161.8% extension in play near $225, up about 7% from current levels.

On the downside, I’m watching for a move below last week’s low at $201.39. Below that level puts the stock below the 10-day and 20-day moving averages, as well as the 123.6% extension that has been acting as support.

In that case, it will put the 10-week and 50-day moving averages in play near $197 and $194, respectively. Below puts the February high on the table at $189.65.