Microsoft Corporation develops, manufactures, licenses and supports a range of software products, including scalable operating systems, server applications, worker productivity applications and software development tools. For the 3 months ended 9/30/00, revenue rose 8% to $5.8B. Net income applicable to Common before acct. change rose 18% to $2.58B. Results reflect accelerating deployments of Windows 2000 and higher investment income.

January 7, 2001

Microsoft reached an all time high of $119.94 in December 1999. It seems incredible that this stock, which is a major component of the Dow Jones Industrials and the NASDAQ, lost 66% of its value when it apparently bottomed one year later at $40.25. Slowing earnings are definitely a concern. However, the company is one of the most profitable in the world and they continue to dominate the software industry. With a P/E of only 27.14, Microsoft appears to be a solid value at these levels. In the short term, Microsoft may get a much-needed shot of positive PR when it gives a demonstration of its Xbox video-game technology in Las Vegas on Saturday. Impressive technology can still wow investors and get them reaching for their checkbooks. Technically, MSFT appears to making an important base. If the stock can trade above resistance of $52.00, it could easily rally a quick 6 points and close a trading gap. The MACD turned positive this week, which is a good indication that the worst could be behind the stock. OBV and Money Flow also appear to have made important bottoms, as vigorous selling seems to be tapering off. The path of least resistance should be up. We will look for the 5-dma, now located at $45.69, to provide near term support for the stock.

Picked on January 7th @ $49.00
Change since picked +0.00
Stop Loss @ $45.00

January 18, 2001

The strong NASDAQ rally gave shares of Microsoft a nice boost into the close. We officially ended this play on the closing print due to the earnings release. After the close, MSFT reported profits of $0.47 a share, which was in line with lowered expectations. Revenues came in at $6.59 billion, which was above expectations. This positive surprise has sparked a nice rally in the shares of MSFT after the close.

Picked on January 7th @ $49.00
Profit/Loss +6.63 (14%) (Stopped Thursday @ $55.63)
Best Profit +7.19 (15%)

January 16, 2000

Intel (INTC) launched a huge week for major technology stock earnings releases after the close today. The semiconductor leader posted numbers that were pretty much in line, but somewhat disappointing on the revenue side. Intel's results are closely watched by Microsoft investors because of the Win-Tel relationship. Microsoft will report its earnings on Thursday after the close. Although it may be too early to tell, the immediate neutral trading action in Intel shares after the close probably means that it is unlikely that Microsoft will stage a major rally ahead of its earnings report. On the plus side, there appears to be very little downside risk for Microsoft over the next two trading sessions because the stock has put in a very important technical bottom. The current trend line, which is mirrored by the 10-DMA, has created good support at $50.34. This price is just above our stop. The MACD, OBV and the Money Flow all show that MSFT has put in an important bottom. With that said, please remember that we will exit this position no later than the end of trading on Thursday to avoid the potential volatility following the earnings release.

Picked on January 7th @ $49.00
Change since picked +3.63
Stop Loss @ $49.50

January 14, 2001

Microsoft finished off a stellar week with some mild profit taking. This was not an entirely unexpected result, considering that the markets will be closed on Monday and many traders probably wanted to go into the weekend with fewer stocks on their books. Microsoft did enjoy some good news from the legal battlefront. A federal judge dismissed 38 cases that accused Microsoft of price gouging with its Windows operating system. During intraday trading last week, MSFT successfully closed a gap that existed between $55.38 and $52.00. This is a good sign that MSFT may have put its worst days behind. The next major resistance will likely be the slightly down sloping 50-DMA, which is now located at $58.09. MSFT will have to close above this barrier if it wishes to maintain its comeback. Hopefully, this will occur quickly because MSFT will report their earnings after Thursday's close. True to our trading rules of not holding positions over an earnings report, we will exit this position no later than the close of Thursday's trading. On the plus side, the MACD continues to move higher in a powerful ascent. The OBV and the Money Flow have both turned positive, as they continue to move off their lows. The RSI tells us that there is plenty of rally room before the stock becomes overbought. Initial support this week should still be found at $49.75.

Picked on January 7th @ $49.00
Change since picked +4.50
Stop Loss @ $49.50