Microsoft Stock Poised To Head Lower After Tablet Announcement

Microsoft stock which on Friday was back above $30.00 appears ready to pullback once again. For the first three trading days of June, Microsoft stock fell back below $29.00, trading as low as $28.32. The news late last week that Microsoft had a big announcement for Monday seems to have popped the stock. Investors by and large are quite predictable. For more than 50 years the strategy has always been for investors to “buy the news” and then “sell the unveiling”. You would think by now investors would have learned. Mon Monday Microsoft announced their entry into the tablet arena to go head to head with the iPad. How successful this will be is anyone’s guess right now. Microsoft has deep pockets and is not really an inventor or even an innovator. They are more a tinker and tweaker kind of company. They take an idea and keep at it until it either turns a profit like XBox has or they quietly drop it like the Microsoft Phone (anyone remember that one?) or Windows ME.

Right now Apple owns the tablet market so it will be interesting to see if Microsoft can unseat Apple.

Microsoft Stock Is Overbought

Microsoft stock is currently overbought and the fast stochastic is showing that the stock is right at the edge of the drop zone. Microsoft stock should fall from here. The %K and %D are so close that a pullback would appear ready to happen. Meanwhile the slow stochastic still shows up but it is very overbought at these levels.

Microsoft stock stochastic readings

Stochastic readings from Microsoft Stock

With Microsoft stock overbought, the question is will it pull back to $28.00. Let’s look at the Microsoft stock charts to find out.

Microsoft Stock Charts

The chart below is Microsoft stock for the past couple of months. Back in April Microsoft stock was trading about $32.00 before it commenced to fall. Analysts have been pushing Microsoft stock at investors since it hit $32.00, so you know a lot of them must have clients in at above $30.00. This is typical stock manipulation. Keep talking it up. You can tell looking at volume from today and Friday that a lot of their clients got out at $30.00.

Microsoft Stock trend is lower

Microsoft stock trend is lower

Microsoft Stock 3 Year Chart

Looking at the 3 year chart, there is very little support at $28,00 as it would appear much more likely that $28 is nearer the top in the stock.

There is a lot of support at $26 and below. If the stock got back to $24.00 it would be a great buy as Microsoft stock is very undervalued around $24.00.

Microsoft Stock 3 Year Chart

The three-year chart of Microsoft Stock Prices shows strong support is at $26 and below. $28 has very little support.

Microsoft Stock 1 Year Chart

Looking out over the past 12 months in Microsoft stock, you can see that there is really no support at $28.00. Instead most of the support is back at $26.00 or lower. Until Microsoft stock can prove its worth, the stock is probably going to work its way back to $28.00 and then if that breaks, the stock will easily fall to $26.00. Once again in the 1 year chart you can see that $24 would be a great buy as it is definitely undervalued at $24.00.

Microsoft stock 1 year chart

Microsoft stock 1 year chart shows no real support at $28.00

No Need To Rush Put Selling Against Microsoft Stock

There is no need to rush into put selling against Microsoft Stock. The better strategy would be to wait for the stock to fall lower and keep an eye on the fast stochastic as the stock approaches $28.00. If the fast stochastic appears ready to bounce, sell a handful of naked puts then. But I will be taking my time selling puts and waiting for opportunities as the stock pulls lower. By selling only a small number of naked put options each time the stock falls lower, I should be able to work my way into selling puts for better premiums and at lower strikes as Microsoft stock falls.

  • Pietrusikm

    teddi, if what you predict is going to happen, why not just buy 30 and 32.5 puts going out 2-5 months. would seem to make more sense. thanks

  • I wrote an article explaining when to consider buying put options rather than selling puts. You can read it here http://www.fullyinformed.com/microsoft-stock-question-buying-put-options-put-selling/
    Teddi Knight

  • Yes my prediction didn’t work out. The technical timing indicators were all still showing stock higher. It was my interpretation of the fast stochastic that was wrong. Sometimes I just want the trade to work out and I had really thought I could get more out of Microsoft Stock. Oh well, there will be other days. That’s the beauty of put selling stocks I would own. I still profit even when I am wrong.