To The Moon

Introduction

Microsoft (MSFT) has been one of the most consistent performers in the technology sector over the past few years. With a market cap of over $2 trillion, it is one of the largest companies in the world. However, as an investor, it's important to remain vigilant and consider all possible factors that could affect the stock's performance. In this article, I'll discuss why I'm bearish on $Microsoft(MSFT)$ in the short term and what you should be watching out for.

Understanding the Market Indicators

I often assess a stock's short term performance based on the Relative Strength Index (RSI). The RSI measures the strength of a stock's price action over a specified period, usually 14 days. It ranges from 0 to 100 and is considered overbought when it crosses above 70 and oversold when it falls below 30. As of yesterday, MSFT's RSI (14-day time frame) is at 67.4, very close to the overbought region. This suggests that the stock may be due for a pullback.

Microsoft Day Chart 

In addition to the RSI, I also pay close attention to support and resistance lines. Support and resistance levels are areas on a chart where the price of a stock tends to find support or resistance, respectively. These levels can help investors predict potential price movements. Currently, MSFT's short-term support level is at 273.80 based on the day chart above.

Nasdaq Day Chart 

On top of this, the Nasdaq composite $NASDAQ(.IXIC)$  has already been rising for two consecutive days and is near the short-term resistance level around 12240 based on the day chart (above). There may be some profit-taking for traders, especially at the end of the week. This could also put pressure on MSFT's stock price in the short term.

Amazon's Weaker Cloud Revenue Guidance Spells Trouble for Microsoft

Another factor that is contributing to my bearish outlook on MSFT is the recent news from Amazon (AMZN) $Amazon.com(AMZN)$ . On Thursday, April 27 2023, Amazon shares hit 11% higher at one point in the post-market after posting its biggest quarterly profit since 2021. However, it finished the extended trading session down 2% after the company's chief financial officer admitted in a conference call that Amazon Web Services (AWS) revenue is decelerating in the current quarter. The weaker guidance from Amazon on its cloud business will likely impact Microsoft cloud business’s outlook as demands from companies drop with the current economic uncertainty. This could lead to a decline in MSFT's cloud revenue and, in turn, a decline in its stock price.

Possible Trades Ahead

Based on the above factors, I believe that MSFT is likely to experience a pullback in the near future:

For very short-term trading, a quick turnaround is possible by buying Put Options at the strike price of 305 expiring today. It's important to remember to close your positions if you do not want to exercise them.

If Microsoft stocks decline for the next few days, long-term investors may want to sell Put Options at the strike price of 270 or 272.5, as the short-term support level is 273.80.

However, we need to watch the broader market closely as large-cap stocks such as MSFT will trend with it. Any major news or events could significantly impact the stock's price.

Conclusion

In conclusion, while MSFT has been a consistent performer in the past, current market conditions suggest that the stock may experience a pullback in the near future.

Comment if you agree or disagree with me on Microsoft.

Thank you for reading.

@MillionaireTiger  @CaptainTiger  @TigerStars