MSFT Outlook for Tuesday and Plan

Feb 21, 2022

Hey All,

So MSFT has been on my watch list. I love the stock and have been meaning to attempt to map it out quantitatively to see if it would be a viable option for my quantitative strategy.
I just finished back testing today and, its a go!! Very happy about that. It actually honors the math predictions fairly well, almost as good as SPY and QQQ which is surprising. If you are interested in the backtesting criteria, I have included it at the end of this post.

So, I am going to attempt to play this on Tuesday. This, SPY and BA are all on my play list for Tuesday. I will be taking a small position in MSFT because this will be the first time I actually will trade it, and I will do the option side just to hedge the risk.

So let's get on to the analysis and trading plan:

Essentially, from a technical stand point, my SPY analysis could literally be copied and pasted to MSFT.
MSFT has formed a double top, it consolidated at the neckline, which is a common occurrence with double top formation, only to break away from that consolidation on Thursday and open and hold below the neckline on Friday. Very strong bearish indicators.

So in modelling this stock to fit into regression calculations, these are the targets that those calculations forecast for tomorrow:

High: 291.92 +/- STD Error of 1.57
Low: 289.90 +/- STD Error of 1.76.

I am short biased. I will be looking to enter when I see upper resistance, hopefully around 291/292 with 4 contracts.
My price targets would be:
1. 289.90
2. 288.14 (Predicted low - Standard Error)
3. Calculated Adjusted low based on MSFT's open price
4. Let the last contract ride until I see rejection back to the upside

My plan will be invalidated if:
1. MSFT breaks above 294.16
- In this case, I will be out completely and won't be trading MSFT.
2. MSFT gaps down and opens around 289.90 or lower
- IN this case, I will use my adjusted high and low calculations based on Open price (which obviously I can't do until I know what MSFT opens at), and maintain my short bias. My price targets would become exiting 2 contracts at my adjusted low, exiting 1 contract at my adjusted low minus its standard error, letting the last one ride until I see rejection to the upside.

Judging by how futures is trading currently, we may end up seeing a gap down on Monday. I am hoping for this not to happen, but it is a real possibility we need to account for.
Unfortunately, Futures doesn't make dramatic moves until roughly 3 to 4 am, so looking at it tonight won't be all that helpful. But seeing that its open now and its showing a lot of weekness and making a shooting star candlestick on the daily, I am nervous about a gap down. Not that its bad, its just it ruins my calculations and I have to readjust in the morning and reset my targets, and its annoying.

Also, can we talk about how unfair it is that futures traders get to trade today?
And talk about how privileged we are as traders to actually wanna go to work every day haha.

And for you swingers out there, I think if you want to hold for longer to get a bigger move, MSFT and the market as a whole, looks like it wants to retest its lows this week. This is just my personal opinion. And my hope, I would like MSFT to come down more because I would like to add to my long term holdings of this stock. I stan MSFT hard.

Anyway, as for my backtesting results, if you are interested, when I back test the validity of these calculations, my criteria are as such:
1. On a bearish/short biased day, must AT LEAST reach predicted low OR preferably exceed predicted low but DOESN'T NEED TO REACH THE HIGH.
2. On a bullish/Long biased day, must AT LEAST reach predicted high OR preferably exceed predicted high DOESN'T NEED TO REACH THE LOW.
3. On a neutral/consolidation day, MUST Touch BOTH High and LOW +/- Standard Error Range and NEEDS TO REACH BOTH LEVELS.

These criteria serve as the basis for my backtesting, and then I chose 20 random points in time to backtest the calculations from historical data.
MSFT scored a 95% with preference to the Bearish side (meaning it tends to be on point on the bearish side).
Its adjusted calculations (the predicting of high and low based on same day open price) tested 100% with the same criteria.


Keep in mind, as I said before, I have never traded MSFT. So you probably shouldn't listen to me. This isn't financial advice and you should probably listen to someone who knows MSFT better.

Anyway, I am out to try and enjoy the rest of this weekend and won't be letting stocks drag down my weekend anymore than they have.
I hope you all enjoy the rest of your weekend! Take a break, after the crazy weeks we have with this market, we really should just take a rest and recoup.

As always, feel free to ask your questions, give your criticisms, etc. etc.
Take care everyone and happy trading tomorrow!

Feb 22, 2022

Trade active

This day couldn't have been more better/planned.
WOOO!