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Technology stocks continue to mostly sit this bull run out. The contrast between the tech-heavy Nasdaq and small-cap ridden Russell 2000 Index is stark. While the latter has donned the rocket boosters, the former continues to languish in a range-bound prison.
But not all tech stocks have bit the dust. Some, like Microsoft Corporation (NASDAQ: MSFT ), are holding firm. Indeed, MSFT stock has succeeded in basing just beneath all-time highs while many of its peers are retreating.
Once the pressure on the tech sector dissipates you can bet stocks that have held up the best in recent weeks will be first to lead the space higher. Chief among these leaders is Mister Softee.
Since vaulting higher on positive earnings mid-October, MSFT has been in base building mode.
The sideways churn has allowed Microsoft shares to digest their hard-fought gains, while longer-term moving averages have played catch up.
Near-term resistance at $61.50 has thus far kept a lid on the stock, but I suspect its strength is waning.
Typically the more times a support or resistance level is tested, the weaker its resolve becomes. If you're looking for bullish plays in MSFT stock, the setup is simple. Wait for a breach of $61.50, then sally forth with bullish trades.
The MSFT Stock Trade
On the volatility front things are getting, well, depressed. Since earnings the implied volatility for MSFT stock options has receded to the lower end of its one year range. With the IV rank now perched at 20%, it's a decidedly less bad time to grab calls than before earnings.
Rather than going for the gusto with a straight call purchase, consider buying a call spread to lower the distance MSFT needs to rise to score a big profit. Buy the Feb $60 call while selling the Feb $65 call for a net debit around $2.20.
The max loss is limited to the initial debit and will be forfeited if the stock sits below $60 at expiration. The max reward is limited to the distance between strikes minus the net debit, or $2.80, and will be captured if MSFT can rise above $65 by expiration.
As mentioned previously, wait for a pop above the $61.50 resistance level before pulling the trigger.
At the time of this writing Tyler Craig had no positions in any of the aforementioned securities.
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The post Double Your Money on the Microsoft Corporation (MSFT) Stock Breakout appeared first on InvestorPlace .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
