Part 3

We at Dow Experts, are always very excited to see such profit-taking and panic related corrections on the market because they give us a chance to buy our favourite stocks at a great discount and therefore be able to maximize our profit potential to the upside in the long term.

Therefore, due to the current coronavirus outbreak and the massive sell-off on the market, we have decided to analyze the performance of the biggest stocks within the two ETFs we are currently buying (XLK & XLY).

Microsoft (MSFT)

Our next stock-pick for the month is Microsoft Inc. The company has been delivering great financial results in the past 5 years, growing its sales and profits, beating analysts’ expectations and thus boosting investors’ profits. Microsoft’s has got a very strong market positioning in the sector it operates, currently boosted also by its robust Commercial business and its cloud-computing service Azure and its expanding customer base. Moreover, the company keeps on expanding its user base of Office 365 and Dynamics and their results, which are very encouraging. The company’s subscriber base has been improving its competitive edge in the enterprise communication market against Slack and Zoom. Similarly to Apple, Microsoft doesn’t expect to meet its previous projection for the next couple of quarters this year due to the coronavirus outbreak in China.

The company’s share price more than doubled in 2019, representing a movement from $90 to $190. Even though the coronavirus outbreak is raising a lot of concerns for the next few months, we believe the short-term still gives us a chance to make high profits on the stock to the upside, mainly due to the recent correction that has taken place on the chart. The stock fell from $190 highs to the $132 lows. It is currently trading at $165 and still very far from the highs at $190 created back in February this year, giving us a chance to buy the stock at a 13% discount from the highs and thus boosting our profitability to the upside in the short to middle-term.

The daily chart shows that the price found lots of buying pressure at the $132 diagonal support, leading to a huge buying interest at that point, which has then sent the price towards the $170, followed by a short-term profit-taking correction towards the current levels at $165. The price is currently showing a lack of bearish momentum and is failing to go much lower than the current levels, giving a signal for a very likely bullish movement on the stock in the short-term. The current $165 also matches with the 50-day Moving Average staying exactly at that point, while the technical indicators are heading higher as well, giving further bullish indications. Based on our fundamental and technical analyses on the stock, we will take advantage of buying around the current levels and make high profits to the upside.

Chart: Microsoft Inc.

We will start buying Microsoft at the $161 support. Should the price drop towards the next key support around at $152-$153 we will be interested in buying and adding more to our long position on the stock, thus getting a better average price, which will give us a chance to further maximize our profits to the upside. We will start cashing in profits at $175, followed by our longer-term profit target at $180-$185, below the highs at $190 where lots of profit taking activity is expected to take place and that would likely lead to a correction on the price afterwards.

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