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Another October win could have Microsoft exploring new record highs

Sep 26, 2017 at 3:00 PM
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Microsoft Corporation (NASDAQ:MSFT) has been charting a path steadily higher over the past 12 months, up nearly 29%. Today, the stock is trading up 0.2% at $73.40, not far from its Sept. 18 record high of $75.97. Since then, the Dow stock has pulled back to their 40-day moving average -- a trendline that has served as a springboard over the last year. If past is precedent, MSFT could take aim at new highs over the next several weeks, considering it is one of the best stocks to own in October.

msft stock daily price chart sept 26

According to data from Schaeffer's Senior Quantitative Analyst Rocky White, MSFT stock has averaged an October gain of 5.88% in the past 10 years -- all while boasting an 80% win rate. Based on the stock's current perch, this would suggest a move up to the $77.72 neighborhood, uncharted territory.

A recent batch of options traders isn't betting on another October surge for Microsoft, though. In the past 10 days, the stock's October 78 and November 77.50 calls have seen the biggest increases in open interest, with 19,022 contracts and 17,677 contracts added, respectively. Data from Trade-Alert indicates these calls were likely sold to open, meaning speculators don't expect MSFT to rise above the strikes through expiration.

There are signs of skepticism elsewhere on Wall Street, too. For starters, after skimming a multi-year low in the Aug. 15 reporting period, short interest on MSFT jumped 18.2%. Meanwhile, of the 23 analysts covering the outperforming shares, seven still maintain a "hold" or worse rating. A capitulation from some of these weaker bearish hands and/or a round of upgrades could help MSFT score another October win.

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