Microsoft stock falling below $29 has set up the stock for a possible bounce. If you examine the Microsoft Stock charting you can see that Microsoft stock is in a decline pattern and has been since September 20 when the stock made a new high and commenced a pull-back. On Sept 24 MACD issued a sell signal on Microsoft Stock and MACD has been relentless since.
The recent rally back for Microsoft Stock above $30.00 on Oct 5 ended with a down day for Microsoft Stock and a lower high which is always anything but good. Today’s push back up by Microsoft Stock needs to break the Oct 30 high and then the Sept 20 to confirm the selling is done. But this type of action in Microsoft Stock is excellent for put selling and continuing my Put Selling ladder.
The selling in Microsoft stock has been relentless as you can see in the number of red candlesticks since the high was made on September 20. Just as with so many stocks, new highs are always suspect. Put selling is superior in that regard as selling puts out the money while a stock is climbing allows room for profit and yet can offer some protection to an investor should the new high not be confirmed as was the recent case with Microsoft Stock.
Microsoft Stock Bounce
You could tell that Microsoft Stock wanted to bounce on Thursday and Friday last week. The chart below shows the technical readings for the past few trading sessions. I have marked the key aspects.
A) On Friday Microsoft stock closed near the day’s highs afer spending a third day on the Lower Bollinger Band. By Friday the 5 period simple moving average had fallen to the pint where Friday’s close was at the 5 period. This morning the stock opened highs than Friday’s close and immediately shot over the 5 period SMA. It’s a sign of buying interest and a good sign.
B) MACD which has been negative since the sell signal on Microsoft Stock was issued on September 24 has been flat on Thursday and Friday. While not always a sign of bottoming, this flat reading for two days on Microsoft Stock was confirmed with today’s move higher. This does not mean the selling is at an end. Microsoft Stock must push to recover the highs, but it does provide excellent Put Selling opportunities
C) Momentum is turning back up on Microsoft Stock which is another good sign and another reason to consider Put Selling .
D) The fast stochastic has been giving extreme readings several times over the past two weeks. Today’s reading on Microsoft Stock is finally K period 37.78 and D period 14.42 (at noon on Oct 15). The K period shows how much strength is in the buying and Microsoft Stock is pushing back up. Again this does not mark the end of the decline but could indicate that a bottom was reached. It will take a few days to confirm this.
E) For those who prefer the Williams %R over the fast stochastic, you can see the extreme oversold readings in Microsoft Stock for the past two weeks. Again no guarantee of a bounce but signs of bottoming for sure.
Microsoft Stock Puts Sold
There is never a guarantee when it comes to investing, but reading the above indicators certainly helps when it comes to Put Selling. I already have a range of puts on Microsoft from $26 to $28. On Friday I took advantage of the pull back in Microsoft Stock to sell puts and keep my put ladder bringing in profits. I sold the Dec $27 and the Jan $26 naked puts. These Put Selling trades contained just 5 put contracts each as caution is always warranted when Put Selling against a declining stock. It is not the concern that they may end up in the money. It is the concern that there will be better Put Selling opportunities ahead should the selling in the stock continue for longer than I expect.