Microsoft hits records, but one level could stop rally in its tracks

Microsoft is powering up.

The stock hit all-time highs Thursday, leading the Dow for the week, after the company’s board approved a $40 billion buyback program and hiked its quarterly dividend.

Todd Gordon, founder of TradingAnalysis.com, said Microsoft’s outperformance is clear in the charts.

“It’s been a bullish stock all the way back to 2015,” Gordon said Thursday on CNBC’s “Trading Nation.” “The chart below us here is Microsoft into the QQQs so if this chart below is rising, Microsoft is outperforming the Nasdaq and that’s absolutely what’s happening here and there’s no signs of giving back here on this chart.”

Microsoft shares have surged nearly 40% so far this year, tracking for their eighth annual gain in a row. The QQQ ETF, which tracks the 100 largest stocks in the Nasdaq, is up 25% this year.

While Microsoft’s charts remain supportive, Gordon does see one critical level that could put the brakes on this rally.

“I think we will meet resistance in the upper end of this channel around $155 so if we start to hesitate there, watch out,” he said.

A move to $155 represents roughly 10% upside from current levels. It would also mark a new high.

Microsoft still looks like a buy to Mark Tepper, president of Strategic Wealth Partners.

“We’d stick with it. I mean, what’s not to love about Microsoft right now? The valuation is probably fair, but I mean you’re paying for solid growth and execution. Investors want that, and that’s what Microsoft delivers,” Tepper said Thursday on “Trading Nation.”

Strong growth in cloud computing should propel more upside for Microsoft, potentially eclipsing Amazon’s presence in the space, Tepper said.

“They’ve got some advantages on Amazon and they do have the ability to overtake them over the next few years,” said Tepper. “They’re already in corporate America with their office suite, which pretty much everyone has and uses. Amazon isn’t already in corporate America like that.”

Amazon has risen 21% this year compared with Microsoft’s 40% gain.

Disclosure: TradingAnalysis.com and Strategic Wealth Partners have positions in Microsoft.

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