A drop in Microsoft stock yesterday and today set up a string of trades in my account.
Microsoft Stock 6 Month Daily Chart
Microsoft Stock over the past 6 months has remained in an uptrend which while reasonably strong, does show signs of weariness.
Momentum during the July and August period was far stronger than the momentum seen since the stock jumped to new highs in October.
The chart below shows the Oct 20 earnings and the jump to just above $61. That left an gap which was filled yesterday, Nov 10 when the stock fell below $58.
Gaps up or down are interesting in that often the stock will return to the gap to test for support or resistance. You can see there is a large gap unfilled from the jump in July when earnings again sent the stock higher.
The July jump set Microsoft Stock up to build support around the $56 valuation. Once support was strong enough, the stock kept bumping the $58 valuation but it was not until Oct 20 earnings, that the stock broke through.
A move back down to $58 is understandable and often is a test looking to see just how supportive the $58 valuation is. At present it is fairly strong but unless the stock will push into a new trend with $58 to the low end and $61 to the upper end, the stock may slip below $58 and head back to the $56 support level.
Microsoft Stock 6 Month Chart to Nov 11 2016
Judging just how strong or weak a trend is, is never easy. This is why selling put options for income works so well. I do not have to stay within the present trend and hope that everything works out in my favor. Instead, my strategies allow me to setup trades for lower valuations that sit within a prior trend. That way I can profit while the stock tries to decide whether to establish a new trend, higher, or move back to a more comfortable level of support. My strategies allow me to keep generating income at lower levels, and then if the stock falls lower, I can either accept assignment of shares or roll those remaining outstanding trades, still lower and into another, lower trading level in the stock.
This article outlines my trades and the outlook for the stock heading into the end of the year and into early 2017. Microsoft has generated significant returns in 2016. I am expecting 2017 will provide a similar return.
The rest of this Microsoft Stock strategy article is for FullyInformed Members.
Microsoft Stock (MSFT) Trade Alert for Nov 11 2016
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