Two Ideas for Trading Microsoft (MSFT)

06/15/2010 12:01 am EST

Focus: STOCKS

Microsoft Corporation (MSFT) - This stock mirrors the recent price history of the broad stock market.


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This chart is a study of the current market condition with a huge double top, a penetration of a significant support line at $28, and a recent history of high volume on down days and low volume on up days. 

But its chart also shows a trading buy signal from the stochastic indicator, telling us that a rally to its recent support line (now resistance line) at $28 could occur before turning down again. 

Traders may want to take speculative positions in call options now to capture a two-point trade, but they will want to put a stop-loss order just under $24. 

Short sellers should be alert to a possible breakdown at $24 with a target of $22 or possibly even $20.

By Sam Collins of OptionsZone.com

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