Microsoft Stock Reaches 52-Week Highs After Baidu Deal

Microsoft Stock Reaches 52-Week Highs After Baidu Deal
Microsoft Corporation (MSFT​) shares rose to new all-time highs after the company announced an autonomous vehicle partnership with Baidu, Inc. (BIDU​) earlier this week. Baidu’s Apollo platform – which includes over 50 car manufacturers, tech companies and R&D facilities – will leverage Microsoft’s Azure cloud to provide global scale outside of its native China, as well as to provide artificial intelligence, machine learning and deep neural network capabilities.
Later this week, Microsoft will announce its fourth quarter financial results, and investors will be looking for ongoing growth in cloud services and infrastructure. Third quarter revenue rose 6.3% to .56 billion – missing analyst estimates by million – but earnings per share of 73 cents beat analyst estimates by three cents. Investors will also be listening in on the company’s conference call for hints as to where Microsoft sees opportunities in autonomous vehicles and other areas. (See also: Microsoft Joins Baidu’s Driverless Car Project.)

From a technical standpoint, the stock broke out from prior highs of around .00 toward R2 resistance at .77. The relative strength index (RSI) rose to overbought levels at 69.11, but the moving average convergence divergence (MACD) remains in a bullish uptrend. Traders should maintain a bullish bias on the stock given these technical factors, but fourth quarter earnings will be the primary driver of price action this week.
Traders should watch for some consolidation between trendline​ support and R2 resistance before a possible breakout or breakdown on Friday following Thursday’s after-market earnings announcement. Poor earnings could send the stock down to R1 support at .85 or the pivot point at .05, while better-than-expected earnings could lead to a breakout above R2 resistance to new highs. (For more, see: Tech Stocks Break Through Dotcom Era Record.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.
Microsoft Stock Reaches 52-Week Highs After Baidu Deal