The Blue Chip to Buy Now

Microsoft's recent pullback could be a buying opportunity

Dec 8, 2017 at 12:40 PM
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Since gapping to a record high of $86.20 in late October, the shares of Microsoft Corporation (NASDAQ:MSFT) have been relatively range-bound. However, in the wake of the recent pullback in tech stocks, MSFT stock could be flashing a big "buy." Below, we'll take a look at the technical signal that's preceded pops for the blue-chip stock in recent history.

MSFT stock recently came within one standard deviation of its ascending 40-day moving average, after a lengthy stretch above this trendline. One month after the last 10 pullbacks of this kind, the equity was higher 80% of the time, and up an average of 3.07%, according to Schaeffer's Senior Quantitative Analyst Rocky White.

The blue chip has been a beast on the charts since mid-2016, rallying close to 75% in this time frame. Microsoft stock is leading the Dow higher today, up 2% at $84.15. Another 3.07% rally from current levels would put the shares around $86.30 -- in record-high territory.

MSFT stock chart

Despite the equity's long-term uptrend, there's plenty of room on the bullish bandwagon. Six analysts maintain "hold" or worse ratings, leaving the door wide open for potential upgrades to lure more buyers to the table.

Meanwhile, MSFT sports a Schaeffer's put/call open interest ratio (SOIR) of 1.38, which is higher than 94% of all other readings from the past year. This indicates that short-term options traders have rarely been more put-heavy on MSFT in the last 52 weeks. An unwinding of pessimism among options players could also bode well for the blue chip in the near term.

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