Why It May be Best to Wait for Microsoft to Pull Back

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FILE - In this Jan. 28, 2020, file photo a Microsoft computer is among items displayed at a Microsoft store in suburban Boston. Microsoft says its supply chain is being hurt by the virus outbreak in China and will return to normal operations at a slower pace than it expected a month ago. (AP Photo/Steven Senne, File)

Microsoft (MSFT) has been unstoppable.

After bottoming out around $280, the tech stock just gapped to $325.70.

All thanks to its latest batch of earnings.

Revenues were up 22% to $45.3 billion.  Operating income jumped 27% to $20.2 billion.  Net income came in at $20.5 billion GAAP, and $17.2 billion non-GAAP.  Both were up 48% and 24%, respectively.  Diluted EPS was $2.71 GAAP, and $2.27 non-GAAP, up 49% and 25%.

However, if you’re looking to buy it now, wait for it to pullback first.

After an explosive run, the stock has become technically overbought on RSI, MACD, and Williams’ %R—and is overdue for a healthy near-term correction.

While that call goes against the grain, I’m just telling you what the charts tell us.

Wedbush analyst Dan Ives says it could hit $400.  “I think this is just more fuel in the engine to drive this stock higher,” Wedbush analyst Dan Ives told Yahoo Finance. “It just shows [Microsoft CEO Satya Nadella] in this cloud arms race is continuing to gain share.”

JP Morgan raised its price target to $320 from $310.  Stifel raised to $380 from $325.  Evecore ISI raised to $370 from $325.  Morgan Stanley raised to $364 from $331. Credit Suisse raised to $340 from $320, as well.

Again, while I believe MSFT can climb higher, long-term, it’s overdue for a healthy pullback.