Week 42 Stock Watch
By Antreas Themistokleous
17 October 2023
Two stocks to add to your watchlist are MSFT and GOOGL. Read on to know why.
Microsoft Corporation (MSFT) saw its share price decrease by around 6% in the third quarter of the year, closing at $319.90 (USD) on 30 September. The company’s earnings report for the fiscal quarter ending September 2023 is expected to be released on Tuesday, 24 October, after the market closes. The consensus EPS is $2.65, up from $2.35 in the same quarter last year.
Historically, the company has not exactly been a 'dividend heaven,' as the dividend yield has been kept below 1% for the last four years. On the other hand, the financial statements show why investors and traders might still be interested in the tech giant. Total assets outweigh total liabilities at a ratio of 2:1, while the current ratio stands at 178%, indicating that the company has a solid balance sheet to withstand any short-term turmoil.
Technical analysis indicates that the price has been correcting to the upside since early October, after finding sufficient support on the lower band of the Bollinger Bands around that time. Currently, it is testing the resistance of the 23.6% level of the weekly Fibonacci retracement and the 100-day moving average. The Stochastic Oscillator is in the extreme overbought levels, possibly indicating that a correction to the downside might be seen in the coming sessions, while the faster moving average is trading below the slower one, further supporting the bearish narrative.
On the other hand, if stronger earnings are released later this month, then we might see a spark in bullish volatility, which could push the price to new highs, or at least a retest of the latest high around the $340 price area.
Shares of Alphabet Inc. (GOOGL) rose by around 10% in the third quarter of the year. The company’s earnings report for the fiscal quarter ending September 2023 is expected to be released on Tuesday, October 24. The consensus EPS is $1.45, up from $1.06 in the same quarter last year.
The company’s debt is at its lowest since the third quarter of 2020, consisting of just shy of 12%. The company also boasts a remarkable current ratio, which stands at 217% as of 30 June 2023, indicating its ability to repay its short-term liabilities with the current assets in possession. The ratio of total assets to total liabilities is at an astonishing 3:1, while the net income increased by almost 15% year-over-year in the second quarter of 2023. All in all, Google has been one of the investors' and traders' favorites, and it's clear why just by looking at the company’s financials.
From the technical analysis perspective, the price has been trading with relatively steady bullish momentum throughout the majority of the quarter making consistent gains on its share. Currently, the price is trading above all its technical indicators like the moving averages and Fibonacci levels and is retesting the previous high of $139-$140 area.
The 50-day moving average is trading above the 100-day moving average validating the bullish momentum but on the other hand, the Stochastic Oscillator is in the extreme overbought levels possibly suggesting that a correction to the downside before resuming the overall bullish rally might be possible in the near short term outlook.
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This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.
Antreas Themistokleous is a trading specialist in Exness. He is a Certified Financial Technician since 2018. As a member of the Society of Technical Analysts, Antreas is implementing advanced use of indicators and patterns to conclude in an action plan for different trading strategies.
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