Friday, April 18, 2008

How will people play MSFT for their earnings release?

Now that the market has popped up a bit after decent quarterly results from Intel, IBM, and Google, the question is how people will position themselves ahead of and in response to Microsoft's quarterly financial report which comes out after the market close on this coming Thursday, April 14, 2008. Some possibilities:

  • The rally might run out of steam before we even get to Microsoft.
  • The rally might continue as it has and get a further boost from Microsoft
  • Microsoft (maybe by itself) might rally strongly in advance of the report on Thursday and then decline after the report, even if it is strong, on traditional "Buy the rumor, sell the news" trading sentiment.
  • The rally might encounter a little profit taking between now and the market close on Thursday,but otherwise stay intact, Microsoft could see a decline in advance of their report, and then see at least a modest or possibly even a sharp rally after the report.

In short, anything could happen.

One underlying concern is whether the recent rally is simply a short-term trading phenomenon (stocks oversold in response to GE and other anxieties) or whether it is the base of a recovery rally in anticipation of better economic news six to nine months from now.

I am assuming that Microsoft will have solid numbers. I would note that they did not issue any "warnings."

As of the close on Friday, MSFT is at its highest level since the announcement of the Yahoo acquisition proposal.

In any case, it will be a great show this coming week.

I personally am not planning any trading in advance or in response to any of this, but I do hold a sizeable fraction of my net worth/wealth in MSFT stock as well as some underwater July 35 call options (I refer to them as my "Not Worth / Not Wealth.")

-- Jack Krupansky

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