MICROSOFT: On the way to the top of the channel!! We're in!!On Wednesday, January 29, Microsoft presented its results. Its results were better than expected in Sales, EBIT and BNA, however, the growth of Azure (cloud) disappointed and the value began to fall towards the bottom of the LATERAL channel in which it has been moving for months.
Main figures compared to the Bloomberg consensus:
Sales: 69,632 million dollars (+12%) vs. 68,903 million dollars expected.
EBIT: 31,653 million dollars (+17.1%) vs. 30,258M$ expected.
BNA: 24,108 million dollars (+10.2%) vs. 23,443M$ expected.
Within the three major segments of the company, the cloud business is slightly disappointing (growth of +31% vs. +32% expected by consensus). In addition, the management team at the earnings conference pointed out that Azure (cloud business) growth will be somewhat more moderate than expected (range +31%/+32% vs. +33% in this quarter).
--> What do we do with Microsoft?
Despite the cloud disappointment, if we have a long-term view, Microsoft is a very attractive stock to have in our portfolio.
--> What does it look like technically?
The technical aspect is BULLISH/SIDEWAYS, therefore, if we want to enter the stock, we should wait for the price to touch the bottom of the channel and give us a signal of the start of bullish momentum. AND THAT IS JUST WHAT IS HAPPENING NOW!!.
In H1 timeframe we already have bullish STRENGTH and MOMENTUM (Bull) and in H4 timeframe the MOMENTUM, therefore, we can now enter LONG in the value.
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Strategy to follow:
ENTRY: We will open 2 long positions in the current area of 414
POSITION 1 (TP1): We close the first position in the 446 area (+7.5%)
--> Stop Loss at 385 (-7.5%).
POSITION 2 (TP2): We open a Trailing Stop type position.
--> Initial dynamic Stop Loss at (-7.5%) (coinciding with 385 of position 1).
--> We modify the dynamic Stop Loss to (-1%) when the price reaches TP1 (446).
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SET UP EXPLANATIONS
*** How do you know which 2 long positions to open? Let's take an example: If we want to invest 2,000 euros in the stock, what we do is divide that amount by 2, and instead of opening 1 position of 2,000, we will open 2 positions of 1,000 each.
*** What is a Trailing Stop? A Trailing Stop allows a trade to continue gaining value when the market price moves in a favorable direction, but automatically closes the trade if the market price suddenly moves in an unfavorable direction by a certain distance. That certain distance is the dynamic Stop Loss.
-->Example: IF the dynamic Stop Loss is at -1%, it means that if the price drops by -1%, the position will be closed. If the price rises, the Stop Loss also rises to maintain that -1% in the rises, therefore, the risk is increasingly lower until the position becomes profitable. In this way, very strong and stable price trends can be exploited, maximizing profits.
