Misery loves company. But if you want to get remove yourself from the crowd and profit in Microsoft (NASDAQ:MSFT) stock, it’s time to short MSFT shares today. And then, maybe, go long too. Let me explain.
Don’t get me wrong. I’ve been a fan of Microsoft stock’s reboot the past couple years. But trends, both off and on the price chart, do change. And right now, a bearish shift is emerging in the market and the S&P 500’s largest-capitalization company after MSFT took over those reins from Apple (NASDAQ:AAPL).
What’s behind this concerned, eyebrow-raising change? Blame it on rate policy, less-tolerant sentiment towards equities after a near-10-year-long runaway bull market, the government shutdown or Wall Street’s go-to whipping boy the past few months: the U.S.-China trade war.
To be sure, those are some of the headline headwinds facing Microsoft stock. But aternatively, maybe it’s quite simply a bear on the Microsoft stock price chart that’s just coming out of hibernation if investors look closely enough.
Microsoft Stock Weekly Chart
Bottom line, there are always going to be two sides to every story when it comes to the chart of MSFT stock. For the bulls, shares have corrected by a fairly healthy 18%. The weekly price action has also formed a bullish-looking hammer which found support at price congestion from a prior corrective period.
But I’m not currently buying what MSFT is trying to sell bullish investors on the price chart. My interpretation is Microsoft stock is headed into a deeper and sustained correction.
MSFT Stock Daily Chart
Following a healthy two-year-long rally which nearly doubled the price of MSFT, shares have begun to form a series of lower highs and lows after breaking trend-line support. Now and over the past week the stock has confirmed a simple pullback pattern on the daily chart beneath 200-day simple moving average resistance with stochastics poised to roll over.
MSFT Trade Idea
There are only two certainties in life — death and taxes. And because for the right price I would be a buyer of Microsoft stock, my recommended short in MSFT shares has a hard stop-loss above $103.50 to avoid being a victim of a bullish stampede.
Using this exit strategy can also serve as a signal to reverse and go long Microsoft. This makes technical sense for a couple reasons. First, the bullish weekly hammer would receive confirmation. Secondly, both the bearish daily chart pattern and 200-day simple moving average line’s resistance would have failed by sufficient wiggle room of 0.50% to 1%.
If the initial short goes as planned, I’d look to begin locking in profits near the recent low around $94. Should Microsoft stock continue to falter, the area from $81-$89 is a targeted area to cover the rest of the position.
This zone holds the 38% and 50% retracement levels tied to MSFT’s last significant low in 2016 preceding its breakout to all-time-highs. And without getting too ahead of ourselves, it’s likely also a good area to consider building a long position in a softer, but well-priced, Mr. Softy.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities 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 and StockTwits.