Over the past 10 days, the markets have been hit by two massive knee-jerk reactions. First, DeepSeek AI triggered a near 4% drop in Nasdaq, and just as the markets were stabilizing, Trump’s tariff threats sparked another wave of volatility. Add earnings season into the mix, and we have the perfect recipe for major market swings. One stock that got caught in the crossfire is Microsoft (MSFT) , a longtime darling of the Magnificent 7. Despite reporting an earnings beat on Jan. 29, its Azure growth and forward guidance came in softer than expected, leading to an 9% drop in just six days Post-Earnings Trading Approach: Earnings often create violent knee-jerk reactions, making most technical indicators ineffective due to their lagging nature. Instead, classic price action and support/resistance levels become the key tools for spotting post-earnings trade opportunities. MSFT Post-Earnings Trade Set-up For this trade, I’m relying on two key technical signals: Support/Resistance MSFT has a well-established long-term support zone in the $405-$410 range. After this sharp decline, the stock appears primed for a potential bounce at this key level. Price Candles A Doji candle has formed right around this support zone, signaling potential indecision between buyers and sellers. Doji candles often appear at the end of a trend and can mark trend reversals—but confirmation is needed. To validate the reversal, we need to see higher highs and higher lows in the next trading sessions. The Trade To take a bullish trade on MSFT, I’m using a bull call spread strategy. Since MSFT is trading around $411 at the time of writing, I want to sandwich the price between my strikes by buying a $410 call and sell a $415 call as a single unit. If MSFT expires at 415 or above on March 7, this trade will result in a 100% ROI on capital risked. This approach allows me to participate in a potential bounce while maintaining a controlled risk-reward structure Here is my exact trade setup: Buy $410 call, March 7thth expiry Sell $415 call, Dec 7thth expiry Cost: $250 Potential Profit: $250 Disclosures : Nishant has a MSFT $410-$415 call spread expiring on 3/7/2025 -Nishant Pant Founder: https://tradingextremes.com Author: Mean Reversion Trading Youtube, Twitter: @TheMeanTrader (I cover many of these setups in my book, Mean Reversion Trading , and provide further insights and resources on my website: https://tradingextremes.com .) DISCLOSURES: All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
