How to Trade Microsoft After Its Coronavirus Warning

Microsoft is sinking after the company warned of a revenue impact from the coronavirus. Here's how to trade the stock from here.
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Like the rest of the market, Microsoft  (MSFT) - Get Report shares were under pressure on Thursday, down 3.5%.

The decline came after the company warned about its upcoming quarterly results, saying it doesn’t expect its PC/Windows business to hit revenue forecasts due to the coronavirus. 

Here's Wall Street's reaction so far

Microsoft's warning followed warnings from Apple  (AAPL) - Get Report and countless other companies about similar shortfalls in sales, as the coronavirus disrupts supply chains and impacts demand.

Microsoft stock had been on fire this year - and perhaps a bit too hot. After a strong finish to 2019, shares began an explosive move higher in January, as investors saw the stock go from $160 late last month to $190 just a few weeks later.

No wonder Real Money chose this blue-chip tech leader as its Stock of the Day. Let’s look at the charts.

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Trading Microsoft Stock

Daily chart of Microsoft stock.

Daily chart of Microsoft stock.

As you can see on the chart above, Microsoft stock has endured similar price action to the overall market. That is, a rapid unwind from its highs. At Thursday's low, shares were down almost 15% from the highs.

In a world where the CBOE Volatility Index (the VIX) is north of $25, moves in individual stocks can be erratic and irrational. That makes trading more difficult, and Microsoft is not an exception to that observation.

In any regard, traders can approach Microsoft stock with a set of levels. We also have this morning’s low near $162.50 to measure against given the bounce the stock has seen in the last few hours. 

Below $162.50 puts the $160 level on watch. That was a breakout mark from early January, as well as a retest of support in late-January. Below $160 puts the $156 level and the 100-day moving average on the table.

If Microsoft stock continues higher, see if it can reclaim the 50-day moving average and the $167.50 level. The latter was resistance in January and notable support this past week. Back above this mark puts $175 on the table.

In other words? Keep it as simple as possible - and tread lightly. Below $160 and the 100-day moving average is possible. Above the 50-day moving average and $175 is possible. Those are our levels now.