PreMarket Prep Stock Of The Day: Microsoft

Benzinga's PreMarket Prep airs every morning from 8-9:00 a.m. EST. During that fast-paced highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to a recording, Benzinga will highlight a stock of the day that was featured on the show.

Stock Of The Day: Microsoft

When an issue goes higher and higher on a daily basis with no top in sight, nobody cares about the reasons. When an issue finally breaks that winning streak and has one ugly day, everyone wants to know what the catalyst was, even though there might not be one.

Microsoft Heading For $200 Soon?

A perfect example of this phenomena was the price action in Microsoft Corporation MSFT on Tuesday and its early price action on Wednesday. After making yet another all-time high off Tuesday's open ($190.70), the issue sold off for the remainder of the day before bottoming at $183.50 and rebounded to end the session at $184.44.

Taking into consideration the issue has been on a nine-month winning streak, rallying from its month ending May close of $123.68 to its recent high ($190.70), the retreat may just be a blip on the radar. Keep in mind, a mega-cap stock like Microsoft rallying 54% in such a short time period is a rare occurrence when reviewing its prior price history.

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There Has To Be A Catalyst...

Of course, the mainstream media has to find a reason for the unusual price action instead of realizing that an issue can't go up forever and prudent investors may be taking some profits.

The catalyst identified was a late Tuesday morning report that the FTC was issuing orders "to five tech giants requesting information about prior acquisitions not reported to antitrust authorities under the Hart-Scott-Rodino Act."

This seems to be flawed analysis for a few different reasons. First of all, if any investors sold shares of any of these tech giants on the basis of potential FTC action against them, they would have been foolish. Also, the decline in the issue began off the opening bell, nearly two and one-half hours before the article was published. Based on the price action at that time, that news was negligible as the issue didn't continue its retreat until 1 p.m. EST.

Moving Forward

From a technical perspective, that was one ugly red candle in the issue on Tuesday and should be taken into account when deciding to take profits or short the issue.

Based on the price action on Tuesday, co-host Dennis Dick was not falling for the rebound in Tuesday's pre-market trading and was hands off on the long side.

As it turns out, the pre-market rally in the issue was faded off the open. After peaking minutes into the session at $185.85, fell to $181.85 as of 11 a.m. EST and is attempting to rebound.

Based on the daily charts, its next support levels come in at its Feb. 6 low ($180.06) followed by its Feb. 5 low ($178.41).