How will people play MSFT after the fall?

It will be interesting to see how people play Microsoft now that the quarterly report and initial reaction are out of the way. The stock did fall sharply on Friday (-6.19%) in part due to disappointment that there was no "blowout" surprise and modest disappointment over a modest revenue shortfall and mixed outlook for the current quarter, but I would note that the stock ended only 19 cents lower than the open for the day. That strongly suggests a knee-jerk reaction by traders and short-term speculators. I have not run across any serious analyst or money manager commentary to suggest a sea-change of negative sentiment on Microsoft.

Ultimately, the $64 billion question is whether money managers will contemplate moving out of the stock now that they have had a weekend to contemplate all of the details and ramifications of the quarterly report and outlook from Thursday. I suspect not, but we will see. Traders and short-term speculators can push a stock around wildly in the short run, but it is the actions of longer-term money managers as well as the overall market and overall outlook going forward which determine the stock price trend going forward beyond the short run.

It is possible that the stock could settle a bit more before bouncing.

It is also possible that the stock could bounce within the next couple of days due to short covering, and then dip again before giving a more durable bounce in the coming weeks.

-- Jack Krupansky