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Posts Tagged ‘MSFT’

The Dip in Microsoft (MSFT) Offers a Buying Opportunity

Monday, August 3rd, 2020

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Microsoft has dipped lower over the past few weeks, but several analysts think the broader outlook calls for more upside. Check out the following two articles which discuss the recent earnings report and how the pros outweigh the cons for MSFT investors – Microsoft revenue grew 13% despite coronavirus and Should You Buy Microsoft (MSFT) Stock?

Technicals

From a technical perspective, there are a few things that make MSFT attractive at current prices. First, there is a trendline in place that extends back to lows posted in April and the stock is seen bouncing from it. Further, this same trendline is intersecting with the $200 level which is seen as a support level. In addition to support confluence, there is a candlestick pattern on a weekly chart that suggests a bullish reversal may be taking place.

MSFT Chart August 2020 buy dip in all time high

MSFT Chart August 2020

If you agree there’s further upside ahead for MSFT, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open MSFT 4SEPT20 202.5 Puts (MSFT20084P202.5)
Sell To Open MSFT 4SEPT20 205 Puts (MSFT20084P205) for a credit of $1.08 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when MSFT was trading near $205.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $1.30 per spread.  Each contract would then yield $106.70 and your broker would charge a $250 maintenance fee, making your investment $143.30 ($250 – $106.70).  If MSFT closes at any price above $205 on September 4, both options would expire worthless, and your return on the spread would be 74% (844% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates August 1, 2020

IBD Underlying Updates August 1, 2020

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Buy the Dip in Microsoft (MSFT)

Monday, February 24th, 2020

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Microsoft’s stock price dipped in the past week and these two following articles point out several reasons why investors might want to take advantage of the dip – Microsoft (MSFT): Strong Industry, Solid Earnings Estimate Revisions, and 3 Reasons Microsoft Has More Growth Ahead of It.

Technicals

While MSFT corrected lower last week, downward momentum is lacking when compared to prior weeks. The stock is currently testing the 20-day moving average which is an indicator MSFT has not traded below on a sustained basis in at least six months. Further support is seen at $174 which is a horizontal level near that acted as resistance last month. The strongest appeal to this stock is that the upward momentum has been increasing since it broke out in late October, and this upward momentum has not been negated by the recent dip. It would take a sustained drop below $174 to alter the near-term outlook for MSFT.

MSFT Chart February 2020 buy in dip

MSFT Chart February 2020

If you agree there’s further upside ahead for MSFT, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open MSFT 27MAR20 175 Puts (MSFT200327P175)
Sell To Open MSFT 27MAR20 177.5 Puts (MSFT200327P177.5) for a credit of $0.98 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when MSFT was trading near $179.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $1.30 per spread.  Each contract would then yield $96.70 and your broker would charge a $250 maintenance fee, making your investment $153.30 ($250 – $96.70).  If MSFT closes at any price above $177.5 on March 27, both options would expire worthless, and your return on the spread would be 63% (719% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates February 22, 2020

IBD Underlying Updates February 22, 2020

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

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Success Stories

I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins