“Today’s a day you should be getting out of the trade, not getting into it,” Adami said.
Microsoft shares closed up 4.1 percent at $31.28 after hitting $31.55 earlier.
But positive catalysts await Microsoft stock, said Morgan Stanley analyst Adam Holt.
Because about 16 percent of the stock is owned by index funds and ETFs, a rebalancing of the S&P 500 in September will trigger the purchase of 130 million to 160 million shares, about 2 to 3 days of trading volume, for funds to maintain their relative positions.
“It’s really a series of things, I think, that has put the stock to where it is now. If you think about looking forward, as I said, most of these catalysts are still in front of us,” he said. “No. 2, from a multiple perspective, it’s still a cheap stock at 10 times.
“There’s still another $5, $6 of upside in the stock even though it’s had a nice run.”
Tim Seymour of EmergingMoney.com looked at the midday reversal in price action as a sign it was time to take profits.
“You see consistent and fairly optimistic bets on the options side. People aren’t excessively concerned,” said Mike Khouw of Cantor Fitzgerald, who thought the stock was still cheap.
“What we are looking at is a stock that is trading cheap relative to the market. It’s trading cheap on an absolute basis. It’s certainly trading cheap relative to its own historical multiple going back several years,” he said. “On any kind of a pull-back, I still think this stock is reasonably valued here.”
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Trader disclosure: On Feb. 16, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Grasso is long ASTM; Grasso is long S; Grasso is long XLU; Grasso is long AVAV; Grasso is long BA; Grasso is long D; Grasso is long DIO; Grasso is long LIT; Grasso is long MHY; Grasso is long NUAN; Grasso is long MO; Grasso is long PFE; Grasso is long PRST; Seymour is long BAC; Seymour is long INTC; Adami owns C; Adami owns GS; Adami owns MSFT; Adami owns AGU; Adami owns NUE; Adami owns INTC; Adami owns BTU
For Steve Grasso
Stuart Frankel & Co and it’s partners own CSCO
Stuart Frankel & Co and it’s partners own HPQ
Stuart Frankel & Co and it’s partners own MU
Stuart Frankel & Co and it’s partners own P
Stuart Frankel & Co and it’s partners own ZNGA
For Mike Khouw
For Erica Maschmeyer
Robert W. Baird & Co. Incorporated makes a market in the securities of JWN.
For Brad Hintz
Brad Hintz, as a former Managing Director at Morgan Stanley Group (MS), owns an equity position in MS that is held in a Morgan Stanley Group ESOP Trust at Mellon Bank as convertible preferred stock. These MS ESOP securities were awarded to him as compensation and are fully vested. Mr. Hintz is also an investor in Morgan Stanley Capital Partners III, LP — a merchant banking fund where Morgan Stanley maintains an equity interest as a limited partner. Mr. Hintz participates in the Morgan Stanley Pre Tax Investment Plan, which is a deferred compensation plan structured as a note to Mr. Hintz from Morgan Stanley with the return on the note tied to one of many alternative asset classes. In addition, as a result of the complete spin-off of Discover from Morgan Stanley on June 30, 2007, Mr. Hintz received a long position in Discover stock as a beneficiary of the Morgan Stanley ESOP. These shares of Discover will ultimately be distributed to Mr. Hintz by the ESOP trustee.
For Adam Holt
Morgan Stanley & Co. International PLC and its affiliates have a significant financial interest in the debt securities of Adobe Systems, Autodesk, Intuit, Microsoft, Oracle Corporation, Symantec.
For Zach Karabell
River Twice is long GOOG
River Twice is long AAPL
River Twice is long MA