With few major catalysts ahead scheduled for the forex markets, we’re turning to the equity markets for potential opportunities that CFD and stock traders can keep an eye on.
And this week, it looks like Microsoft’s post-earnings dip could be an opportunity for longer-term players to check out.
Buy the Dip on Buy the Dip on Microsoft?
We just got the latest earnings statement from Microsoft Corp. yesterday, and as usual, the company continues to show it’s a money making machine. Not only did it increase revenue by 19% to $41.7B in FY21 Q3, but it beat previous guidance on almost all metrics, including a net income of $15.5 billion GAAP and $14.8 billion non-GAAP, an increase of 44% and 38%, respectively.
And the company looks pretty optimistic on the future as CEO Satya Nadella comments that the “digital adoption curves aren’t slowing down. They’re accelerating, and it’s just the beginning.” So from a micro point of view, the juice is there for now to draw in fundamental traders to buy until the next earnings call, but what about the technicals?
Well, as with most MSFT earnings releases, the stock dropped after the release (likely “buy-the-rumor, sell-the-news” scenarios playing out and/or not meeting WallStreet’s usual lofty expectations), which seems to be a typical reaction with every earnings release.
And over time, this seems to be a buying opportunity for longer-term investors, and if you’re in the market for taking a stake in the company for either a swing position or longer-term investment, today’s bearish reaction looks like an opportunity to get in a better prices.
On the four hour chart above of MSFT, we can see the pair is trading around the $253 handle, roughly more than -3% from yesterdays close. The next support area isn’t likely until the broken resistance area around the $245 handle / Fibonacci retracement, which could potentially be retested as the divergent stochastic pattern is signaling a potential further decline.
If that area is retested and we see bullish reversal patterns form, that could draw in the longer-term players to take a shot and push the stock higher, especially if the broad equity market / positive global risk sentiment continues to trend higher.
What do you guys think? Is this dip a buying opportunity? Do you see the broken resistance area as a potential support are? Or do you see a bearish scenario playing out? If so, what is that?
Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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