Following a well-received earnings report, Microsoft Corporation (NASDAQ:MSFT) stock is set to get reacquainted with the good old days, but in a new and improved sort of way. And for MSFT bulls, a long call position is priced to leave any dot.bomb misgivings at the door.
Let me explain.
What is old can become new again. It’s not always the case, but the market does have a knack for cycling and rotating through stocks—and why MSFT looks as good, if not better than it did back during the dot.bomb bubble.
The bottom line is this old-school tech giant has managed to carve out a successful niche for Microsoft in the growing cloud services arena with its Azure platform, the company’s standout commercial offering.
Microsoft’s cloud business has taken up some much-needed slack from the company’s declining PC and phone-based markets. What’s more, the cloud helped MSFT stock top Street forecasts and achieve year-over-year growth for its top and bottom-lines.
Now those other sometimes important price lines on MSFT’s stock chart are also adding up to something significantly bullish for investors to get excited about.
MSFT Stock Weekly Chart
It has taken more than 15 years, but shares of Microsoft are now within 6% of its dot.bomb highs and climbing towards a breakout in a very technically constructive manner.
Over the past nine months MSFT stock has carved out a slightly irregular W or double-bottom base. The bullish platform appears all the more sturdy as its actually part of a larger base-on-base pattern.
After MSFT broke out from the former and very similar looking double-bottom, resistance has essentially acted as support for the current formation. That kind of constructive technical chart work is prized by investors.
Also attractive is the ample time and modest gains associated with the MSFT base-on-base formation, as it means there’s a lot of pent-up energy. A breakout of the second double-bottom in MSFT should yield technical power to not only challenge, but explode above the former highs near $60.
MSFT Long Call Strategy
Reviewing the MSFT options board, the September $57.50 call is attractive.
The going price for this protected MSFT position amounts to less than 2% stock risk while within 2% from in-the-money and in position for an anticipated, very powerful breakout.
Net, net it’s our view the September $57.50 call is a smarter and safer alternative to positioning for higher prices in shares of Microsoft, without having one’s head stuck in a cloud.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
