 Okay, folks welcome to our technical analysis of Microsoft stock ticker symbol MSFT It's a little company might have heard of and what we're going to talk about tonight are Microsoft earnings and the reaction by the market to those earnings and Why it's down in the after-hour session and then we're going to take a look at the triple Q names the triple Q's are The Invesco NASDAQ 100 ETF ticker symbol QQ Q Microsoft is the larger component of the triple Q's and probably next to the spiders easily one of the most popular ETFs traded we'll take a look at the relative performance of Microsoft to the triple Q's and Then we're going to do a little bit of a deep dive and some technical analysis on Microsoft And why despite the fact that we had earnings that beat expectations? Why I am bearish technically on Microsoft and have been for quite a while now, so let's get to it I saw off a market watch Microsoft earnings easily top expectations but forecast for Xbox's debut quarter ding stocks I think the overall quarter was pretty good their cloud business very strong earnings per share a dollar 82 Per share up from $1.38 per share a year ago huge huge EPS growth revenue Grew more than four billion dollars year over year for the same quarter Last year and they blew away Analyst estimates for EPS and for sales. So a great quarter Now where the stock has found some weakness is with its forecast for next quarter What it'll be launching the new Xbox console Microsoft guided revenue of 39 spot 5 billion to 40 spot 4 billion in the quarter Amazing growth still and a beat relative to the 2019 holiday period But expectations for next quarter came in lower than the average estimate of 40 spot 5 billion So it's a juggernaut a major league juggernaut. No doubt about it But technically this is a wounded stock and I believe that there is a lot of risk associated with Microsoft stock in the intermediate and short terms their cloud business unit Beat on revenues with 31 percent year over year growth in that business unit. That's amazing When you think about the size of Microsoft, that's just incredible. So net net despite the forward-looking guidance being poor with regard to the Xbox overall the business as a whole is quite sound at current and on a forward-looking basis. So fundamentally, there's really no reason to go hammering these shares down With reckless abandon unless of course the Technicles have gotten way too ahead of themselves and we're going to go to that in a moment We're going to take a look at the charts that have me very concerned about Microsoft on a technical basis I certainly couldn't make the argument on a fundamental basis not giving their known report of earnings for this quarter and their forecast for next quarter now taking a look at Microsoft on a price to earnings ratio basis The shares are Measurably lower than their historical highs, but there's certainly nowhere near their historical lows So let's just say that they're the upper band of the mid-range in terms of PE ratio So it's not really a concern to me the PE ratio. What's more of a concern For me with regard to Microsoft and its valuation is when you take a look at price to sales Here is where Microsoft has just simply skyrocketed in terms of the willingness of investors now when you compare the price of sales relative to a near-peer competitor in Cloud would say Google Alphabet you can see that price of sales by far Exceeds Alphabets and for that matter if you really wanted to get crazy here Price of sales is greater Than Tesla this is a concern now segueing over and into the charts Let's begin with a look at the triple queues on a quarterly time frame And you may be saying why are you using the quarterly time frame? I'll get to it in a moment But take note of where RSI is on a quarterly time frame for the triple queues now The triple queues are important because Microsoft is the largest component of The triple queues and the queues have an RSI rating of 81 spot 2 6 on Accordly time frame so fairly overbought especially for an ETF now when you bring up a chart of Microsoft the RSI on Microsoft is at 92 spot 5 1 think about it 81 on the QQ queues 92 and a half on Microsoft on a quarterly time frame We have never ever in the history of Microsoft been now the last time we were anywhere near this type of an overbought level was back here in October of 1999 and for those of you who were not trading at that point in time the markets were as Irrational then as they are today and it was only a few months later March of 2000 where things got real Real real fast So this is the chart that I'm looking at when I talk about my concerns on a technical basis Now you may be saying you know Bob you picking on the stock. It's a it's a true winner. I have Xbox I love it. Why do you hate it so much because it gets better Good. Let's go to a yearly chart RSI on a yearly time frame is at 93 spot 5 5 Folks, this is a bubble just as back in October of 1999 Microsoft was in a bubble history isn't the process of repeating itself It may not happen tomorrow. It may not happen next week. It may not happen next month But this is going to get resolved and as I always like to say it's not going to end well So before warned, this is a problem now. Let's drill down. How do we close out the day It's not looking great from Microsoft short-term And I'll throw up some lines here to illustrate what I mean You could see that we're putting in lower highs on the RSI Not only that we have broken down to lower lows. We closed out the day today below 50 on RSI What's more concerning to me? Then RSI are the stochastics lower highs and Now trading down below the 50 mark and as I always like to teach members that when you have stokes trading down below the 50 mark and Declining rallies tend to fade folks. It happens all the time Now you may be taking a look at the chart and so you know Bob you're ruling out the fact that we bounced off of support We're holding here dude. You're wrong. We're consolidating. Maybe I am but I doubt it I think they held the shares in check today Waiting for the news and they are now selling that news We closed at 2 13 spot 2 5 Let's check in and see where we're trading at current as I close out this commentary 209 spot 4 so not a horrible after-hours session But it was enough folks for me to Open up a short position just prior to me beginning this recording to put a hedge on My long trades going short the triple queues and if the market weakens up tomorrow We'll be looking to lean more into the short side as I believe that Microsoft is going to continue to remain weak in The very short term at a bare minimum So my closing statement here with regard to Microsoft's short term and longer term is that with no stimulus deal on the table at Current there is a warning flag on the track folks be very very careful. Now if you'd like to see how I use RSI to trade the markets Make sure you watch this video that should be appearing in front of you right now and if you'd like to see last night's analysis of Twilio and its performance after earnings make sure you watch that analysis that should be appearing right in front of you and Everyone have a great night. Be well