MSFT has quietly become the 4th largest market cap stock in the U.S. market in the last 3 months (after XOM, AAPL and GOOG), as it rallied to 6 year highs. Dan discussed his dislike for the fundamentals of MSFT’s business a couple weeks ago in this post. Since the company reports earnings late next week, I wanted to get a sense for how the technicals set up in the stock after its strong run in the first half of 2013.
The 7 year weekly chart shows the 2 key long-term levels to watch going forward:
The obvious resistance level is the high in 2007, at 37.50. The stock’s recent move higher stalled close to 36 (35.78 is the high of the year), so that’s the short-term level to watch on the upside. On the downside, the key long-term level is around 31.50, which served as resistance on multiple occasions in the past 7 years, and likely acts as support on a pullback this year.
To me, MSFT is a stock that is most likely rangebound between those two areas. Zooming in to the 1 year chart, we can see that the most aggressive buying volume this year occurred in late April, between 29 and 32 (circled in red in the lower panel):
At or below $32 is the value area where investors are likely to be aggressive once again on the buy-side. In the meantime, strategies that involve selling volatility ahead of earnings might be an interesting way to play the MSFT range.