Some big-cap stocks are better bought on pullbacks than breakouts.
Today’s stock is one example, and it’s at a textbook perfect support level right now.
Plus, a simple long call strategy could lead to a quick doubling of your investment!
Two weeks ago, Microsoft (MSFT) broke out to a new all-time high for the first time since October of 2018. The NASDAQ index has not made all-time highs yet, so MSFT is leading the charge.
MSFT has a big institutional following. This is why it will often pull back after breakouts. These pullbacks are the best time for swing traders to enter trades.
This tendency combined with the bearish sentiment hanging over the market in the last 2 days has led to MSFT pull back to its breakout levels and its 10-day moving average.
This is the pattern swing traders should be looking for!
As a result, yesterday’s low is a great level for a stop loss for a trade entry over $118.
Based on MSFT’s correction and consolidation since its October highs, the charts suggest that a new move higher could have a target of $135.
Also, options trader may want to consider June calls. If MSFT continues its breakout to $125 over the next 30 days, the June 125 calls are likely to double or better.
And I don’t think the breakout stops at $125!
For starters, however, the trade begins with an entry over $118 with a stop under $117.
I’d use $117 as my stop for the options trade, but I’d also use a 50% loss as a stop if the option declines by that much before breaking 117.
Rick Nartarian, Chief Investment Officer
The American Investor Daily