Microsoft (MSFT) is having an excellent month so far, holding on to a 6.6% gain after Monday’s action. So, is Microsoft stock a buy in December?
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According to IBD Stock Checkup, Mr. Softy has seen a slight improvement in the Composite Rating to 79 on a scale of 1 to 99. While one would prefer to see a Composite score of 90 or higher, Microsoft stock ranks 1st in this metric within the desktop software industry group.
Based on recent chart analysis, it is offering several new buy points. Let’s discuss them briefly.
First buy point: As noted in this comprehensive initial analysis on Microsoft stock, the megacap tech tested holders’ mettle by falling to its 200-day moving average multiple times since July.
Microsoft Stock In December
This chart tool is highly useful for investors who have held shares in this long-term winner a long time. Why?
When a stock takes a break after an impressive run, it tends to dive back to or even below this moving average. The 200-day line shows a stock’s average closing price over the past 200 trading days on a rolling basis. That’s 10 months of trading.
Institutions like to build winning positions in good stocks on the growth end of the stock market spectrum when they fall to the 200-day. Think of it as large fund managers buying shares at a discount.
Therefore, since Microsoft stock has rallied off its 200-day line, which has recently climbed to 423.62, it recently became a buy. However, MSFT has now rallied more than 6% above the 200-day moving average. Therefore, from this vantage point, MSFT is slightly extended. IBD advises short-term traders and investors to avoid chasing a stock when it’s risen more than 5% past a key moving average, including the 200-day.
When To Use The 200-Day Line As A Sell Rule
Another Opportunity
So, this brings us to a second buy point.
As a daily chart shows, Microsoft stock has been building a new base.
The base’s left-side high of 468.35 offers an initial buy point. However, within the base, the enterprise software, gaming and cloud computing titan has also cleared two early entry points at 438.50 and 441.85. Why those two prices, specifically? The stock had encountered stiff selling at 441.85 in mid-September and later at 438.50 just six weeks later. Those resistance levels serve as early entry points as well, even as this high-quality growth stock remains within the base.
Thus, the stock is a buy now if you use 441.85 as an aggressive entry. On Friday, MSFT traded near 448, or 1% above this alternate buy point. On Monday afternoon trading, shares added 0.8% to 450.70, nearly 2% above the 441.85 early entry point.
Therefore, MSFT remains a buy.
Quick Look At Fundamentals
The 90 Earnings Per Share Rating is very good. Earnings have grown from $3.88 a share in fiscal 2018 to an expected $13.10 in fiscal 2025 ending in June that year.
Wall Street sees the bottom line accelerating in fiscal 2026, rising 15% to $15.12.
Microsoft Stock Today: Final Thoughts
If Microsoft stock pulls back, watch to see if 440-441 serves as an area of buying support. For months, those price levels served as a ceiling of selling resistance.
Also, never forget to keep losses in any newly established position small. That’s the golden rule of investing.
With the market in a confirmed uptrend, the chances of making money in growth stocks are strong. Keep an eye on IBD’s current outlook as well as the daily Big Picture column for any potential shifts in the outlook for the stock market.
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