Trading Strategies For Microsoft Stock Before And After Q3 Earnings

Microsoft Corporation MSFT is set to print its third-quarter 2023 financial results after the market closes on Tuesday. The stock was trading lower heading into the event.

When the tech giant printed its fiscal second-quarter results on Jan. 24, the stock gapped down to start the following day but ran into a group of buyers who propped it up near to flat. Microsoft then rallied 15% to reach a high of $276.76 on Feb 8..

For that quarter, Microsoft reported EPS of $2.32 on revenue of $52.7 billion. The stock beat the consensus analyst estimates of $2.30 and missed the $49.8 billion-revenue estimate.

For the third quarter, analysts estimate Microsoft will print earnings per share of $2.23 on revenues of $51.02 billion, according to Benzinga Pro. Read more here... 

Ahead of the print, Bernstein maintained an Outperform rating and raised the price target from $280 to $322.

Exane BNP Paribas analyst Stefan Slowinski downgraded Microsoft from Outperform to Neutral.

From a technical analysis perspective, Microsoft stock looks set to at least bounce over the coming days. Although the stock recently negated a downtrend, it hasn’t bounced higher on the daily chart to confirm a downtrend. It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

Options traders, particularly those who are holding close dated calls or puts, take on extra risk because the institutions writing the options increase premiums to account for implied volatility.

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The Microsoft Chart: Microsoft was working to print an inverted hammer candlestick on Tuesday, which can indicate a bounce is on the horizon. Candlesticks are lagging indicators, however, that require the next candlestick on any given time frame to print for confirmation.

• On Monday, Microsoft printed a lower low to negate its downtrend, with the most recent high formed on April 18 at $291.76. Technical traders may have predicted the uptrend for Microsoft was over because on that date and on April 5, Microsoft formed a bearish double top pattern at that level.
• Although the uptrend has been negated, a downtrend won’t be confirmed unless Microsoft bounces up to print a lower high. If that occurs, bearish traders can watch for the stock to form a reversal candlestick, such as a doji or shooting star candlestick, under $290 for a possible entry to go short.
• Bullish traders want to see Microsoft receive a positive reaction to its earnings print and then for big bullish volume to come in and drive the stock up over the eight-day exponential moving average. If that happens, the 21-day EMA will remain under the eight-day, which would give bullish traders more confidence going forward.
• Microsoft has resistance above at $283.11 and $289.69 and support below at $271.36 and $263.19.

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