Microsoft (NASDAQ:MSFT) Q3 earnings are scheduled to be released after market close today, with an EPS forecast of $1, up from the $0.95 for the same quarter a year ago and a consensus revenue estimate of $29.89 billion, leaping from the $26.82 reported last year.
The software giant has only disappointed on EPS twice and on revenues seven times over the last 22 quarters — the type of results that have propelled the share price up more than 125,000% since it first started trading in 1986. The stock has gained almost 25% since the start of 2019, to close yesterday's session up 1.4%, at $125.44, their fourth consecutive day of gains.
The upward trajectory of MSFT shares certainly appears to be continuing. Positive numbers today could again drive the share price higher, but we think there may be a dip first. Technicals suggest a correction before the price continues to rise.
The stock has already jumped over 8% since its previous record high, on March 18. In addition, the RSI is at the overbought level of 79.38 and reaching the levels of March 21, after it posted a new record high.
The price is the farthest from its uptrend line since the December rout and hasn’t come close to it since its last landing on March 28. Therefore, we'd assume a defensive posture and would wait for a correction to the uptrend line, before considering a long position.
Trading Strategies
Conservative traders would wait for a return move toward the $116 level of the previous record. Then, wait for evidence of supply, with at least one long green candle engulfing a red or small candle of either color.
Moderate traders would be happy with a return to $120, the March high, followed by the same congestion described above.
Aggressive traders would risk a long position with a return toward the $120 level, providing their account could withstand a fuller return move.
Trade Sample
- Entry: $120
- Stop-Loss: $116, previous record
- Risk: $4
- Target: $132
- Reward: $12
- Risk-Reward Ratio: 1:3