Discussion in 'Stocks' started by nitro, Jul 11, 2008.

  1. nitro


    MSFT has been tripple whammyd, once by the uncertainty with the YHOO takeover, the other because it goes mostly wherever the overall market goes, particularly NQ. And finally, Gates reducing his role.

    QM imo is close to peaking, which means that NQ will likely get relief soon. That will in the short term at least relieve some of the overall market pressure on MSFT. The other problem with the uncertainty with YHOO, while not to be taken lightly, at these prices imo we are getting paid to take a position in MSFT long and should be rewarded handsomely.

    Initial target $28.00. And if the YHOO situation resolves, $32.

    No stop loss. This one you only add to at these prices. The tech bear market of 2001, which was the biggest bear market I have ever seen, brought MSFT to $22 (in 2001 dollars). I dare MSFT to get back there again.

    There is one other level of uncertainty: Is Bill Gates to MSFT, what Steve Jobs was to AAPL when he left?

  2. nitro


    MSFT within sight of $28, the first target given above. Now you have to decide two things:

    1) Is MSFT coupled to SIFs? If yes, how much of the gains do you want to risk to a pullback? [Odds that MSFT is tied to NQ at this time is nearly 100% btw]

    2) Is MSFT/YHOO closer to a deal, and if so, what is it?

    Imo, it is prudent to take 50% of the table here if you took this trade, and leave 50% with a 32 target. If MSFT breaks 28, don't worry about the few pennies you missed. Just go long with terminal force again.

  3. nitro


    If you took 50% off above, the next hard question is, where do we get fully long again?

    Imo, this is not the time. We got long MSFT at 25.05 with SIFs (Stock Index Futures) far lower than this. As we stated in the first post, MSFT has three factors of risk (from the poing of view of the investor anyway). The downside _market_ risk here is the hard question. It is not improbable that oil can turn around after a brief selloff, and SPX swooning again on its march to 11xx. That would take MSFT down into 24.xx now that people realize it is a wounded duck.

    Therefore, imo we only nibble long at it on downside drafts in a very disciplined manner and add to our core position slowly. Adding to the core long every .25 on the way down from here is ok. Adding to MSFT on market rallies is harder, way harder, unless you have strict stop loss on everything but core position.

  4. nitro


    MSFT over $28.00. I slowly build my position again after the break outlined below. Extremely difficult to know what to do here - imo the upside and downside risks are out of balance, and I like my chances long. I could take half off again and be prudent, but this time the price action has a different complexion, and almost all the risk to MSFT appears to be market risk.

    I took only a 1/4 off and banked some profits given the above arguments. If the market weakens, I will likely take another 1/4 off.

  5. nitro


    I am adding MSFT again every .33 from 27.50 down. I will martingale size and the closer it gets to $24, the higher my size gets.

    Tech was way overbought, but recent action has brought it nearly inline with overall market risk. Watch for NQ to pause its down slide at 1875.

  6. nitro


    Been adding to position, but I scaled back on the martingale and did a more conservative martingale where I stopped the doubling when the size got a bit big for my taste. Oh well.

    The trader in me says, take some profits off the table. The investor says, you're nuts, let it ride.

    I am letting it ride. I will definitely take some off at $28.00.

  7. rosy2


    i like MSFT longterm. my simple strategy has been selling ATM puts (25 to 27 strikes) and happy to get exercised.
  8. nitro


    That's not a bad way to trade either.

    I don't like option trading thick stocks. MSFT vola is too low and the stock is too low, and the B/A spread is often .01 or .02.

  9. (choice words), nitro.
  10. nitro


    Added three times
    #10     Oct 7, 2008