5 Trades to follow Microsoft into the clouds: Bonus Idea

Here is your Bonus Idea with links to the full Top Ten:

Microsoft, $MSFT, pushed out of a consolidation range in October and has moved steadily higher. Along the way the 50 day SMA has been acting as support. It broke below that 50 day SMA in early July and found support at the rising trend. It reversed then and made a new all-time high in late July before another pullback, this time in a bull flag. That flag touched the 50 day SMA Thursday and price pushed higher Friday.

It ended the week at the top of the flag. A push over the flag gives a target to 77.50. The RSI is pushing back higher in the bullish zone and the MACD is leveling as it moves lower, still positive. The Bollinger Bands® have squeezed and started to open Friday, often a signal that a move is about to happen.

There is support lower at 71.45 and 69.75 followed by 68 and 67.50. Resistance above sits at 72.75 and 74.40 then free air to the upside. The Stock started to trade ex-dividend August 15th and the company does not report earnings again until October 30th. Short interest is low under 1%.

The August options chain shows the biggest open interest at the 75 Call Strike, but sizable contact activity at 70, 72.50 and 77.5 as well. In the September chain it is focused at 75 on the call side and from 67.5 to 70 on the put side, but smaller. October options show open interest on the calls centered on 72.50 and the puts at 65. Finally the November options, after the next earnings report, are building but largest at the 75 call by 9 times.

Microsoft, Ticker: $MSFT

Trade Idea 1: Buy the stock on a move over 72.75 with a stop at 70.

Trade Idea 2: Buy the stock with a September 72.5/70 Put Spread (95 cents) and selling a November 80 Call (57 cents) to fund most of the protection.

Trade Idea 3: Buy the September 72.5/70 1×2 Put Spread (15 cents) for a possible lower entry.

Trade Idea 4: Buy the October 67.5/75/80 bullish Call Spread Risk Reversal (11 cents).

Trade Idea 5: Buy the November 72.50/September 75 Call Diagonal ($2.61), looking to continue to roll the short dated calls to a new short as they expire to recoup further premium.

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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which heading into August Options Expiration sees the equity markets showing some signs of tiring, especially the IWM.

Elsewhere look for Gold to continue higher while Crude Oil consolidates at resistance. The US Dollar Index bounce may be over while US Treasuries are biased higher in the short run. The Shanghai Composite and Emerging Markets are both looking better to the downside short term in their uptrends.

Volatility has crept up but may be stretched, but worth paying closer attention to it in the short run. This changes the bias to lower for the equity index ETF’s SPY, IWM and QQQ. Their charts all show some signs of weakness in the short term, especially the IWM, but less weakness longer term especially the QQQ. Use this information as you prepare for the coming week and trad’em well.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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