Wednesday, August 25, 2010

MSFT Watch

Microsoft Corp. (MSFT) is showing bull phase on the fast stochastic, one of the most volatile of indicators. If the signal holds true, then the stock is rady for another wave up in the undulating decline that has marked its course since June.

MSFT $24.14

The fast stochastic today moved above the 20-line, signaling bull phase. The less volatile technicals -- the parabolic sar, Person's Proprietary Signal, the macd -- remain in bear phase, although the macd today is moving up toward the zero line.

These are difficult times for a mature software player like Microsoft. Desktops, long the mainstay of their market for the operating system and office suite, are on the wane. The growing laptop portion of the market, long part of Microsoft's playground, is facing stiff competition from the iPad and other non-Windows tablet computers.

Microsoft doubled its price after its recession low in March 2009 but failed to push much above 30 and has since given up 30% of that gain.

MSFT is trading below the 20-day and 12-month moving averages. So whether the perspective is short-term or long-term, this is not a reliable bull play.

Which isn't to say that it shouldn't be played. Only that the trader must be keenly aware that this firecracker may fizzle.

Looking at the chart, I'm tempted to say that I would like the stock better once it pierces the 20-day moving average. But that really limits the upside, so if it is to be played, that's probably not a practical options.

Reversal Levels
  • $26.38, +9.3%
  • $25.03, +3.7% (20-day ma)
  • $24.95, +3.4%
  • $ <== You are here.
  • $23.87, -1.1%
  • $22.73, -5.8%
Bottom line: I don't like MSFT much for my own account. I think it's playable, but there are better plays out there. The stock went ex-dividend last week, so there's not even the allure of a meager yield to attract me. Also, MSFT is so gigantic, it is watched closely by big-eyed analysts and is hugely prone to gargantuan news surprises.  

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
  • psar - Parabolic Stop and Reverse
  • adx - Average Directional Index
  • pps - Person's Proprietary Signal
  • ma20 - 20-day moving average
  • macd - Moving Average Convergence-Divergence
  • sto - Fast Stochastic
About the glance: The colors indicate the state of each signal.
  • trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
  • adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
  • psar, pps, macd: green for bull mode, red for bear
  • sto: green for overbought, red for oversold, yellow for the neutral zone.
  • sto zone: green for bull phase, red for bear phase.

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