Morgan Stanley Surges After Its Report - Here's How to Trade the Stock Now

Morgan Stanley stock is ripping to new highs after an earnings smasher. The charts hold clues about how to trade MS stock now.
Publish date:

Thought bank earnings were boring? Think again, as Morgan Stanley  (MS) - Get Report shares erupt on Thursday.

Fourth-quarter earnings of $1.20 a share breezed past analysts' expectations by 18 cents, while revenue of $10.86 billion ballooned 27% year-over-year and crushed estimates by $1.4 billion.

These are not the types of results one would expect from a bank, and the stock’s as much as 8.3% move seems justified in that sense. 

It’s not unlike the quarter that Goldman Sachs  (GS) - Get Report reported, as revenue exploded higher. But that stock did not react like Morgan Stanley's, as Goldman missed earnings expectations due to a $1.1 litigation charge.

But that doesn’t matter. These quarters show that some investment banks are booming right now, and the Morgan Stanley charts reflect that sentiment. 

That’s why Real Money chose the bank as its Stock of the Day. Let's look at the charts. 

Goldman Sachs is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells GS? Learn more now.

Trading Morgan Stanley Stock

Weekly chart of Morgan Stanley.

Weekly chart of Morgan Stanley.

Above is a weekly chart for Morgan Stanley stock, highlighting the various levels that have been in play. There has been some serious accumulation of the stock, as shown via the volume at the bottom of the chart (blue boxes).

That accumulation has resulted in a slow and steady rise in the stock price over the past few months (blue channel). The shares erupted out of this range on Thursday, surging past $55 and taking out the 2018 high.

After such a run -- with the shares 46% above the September lows and up 14 of the past 15 weeks -- investors are surely hesitant to put fresh capital to work in Morgan Stanley stock.

The momentum can certainly continue, though, and if that’s the case, $60 is not out of the question, particularly if the overall market holds up. 

In the event that MS shares pause or pull back, though, it would be encouraging to see it hold above the $54.50 to $56 range. That will allow the stock to digest some of these large gains while allowing bulls to remain in the driver’s seat.

Below this area puts the backside of prior channel resistance in play. Below that and the 10-week moving average and potentially former channel support could in play. 

Given how good of a quarter Morgan Stanley just reported, though, some of these downside levels may not come into play anytime soon -- short of a marketwide correction.