Technical analyst places bet on a big-cap tech stock

Shares of Microsoft have slipped since the tech giant's earnings beat, but that's not stopping one trader from betting that another rally is in store for the stock.

On a chart of Microsoft dating back to November last year, Gordon points out that while the stock has been trading in a range since the end of January, its performance against the market as a whole suggests a bounce is ahead for the tech company.

"As the Nasdaq was selling off, Microsoft held in extremely well," said Gordon on Thursday on CNBC's "Trading Nation.""So we're looking for a break through this upside range that should be able to carry us to about $68 and possibly $70 through the Fed meeting and into the end of March."

This means that Gordon sees Microsoft surging as much as 8 percent by the end of this month.

To prepare for a pop, Gordon wants to buy the April 7 weekly 65-strike calls and sell the April 7 weekly 67.5-strike calls for a total of 79 cents per share. In order to make money on his trade, Gordon would need Microsoft to close at $65.79 on April 7, which is less than 2 percent above current levels.

If Microsoft closes $67.50 on April 7, then Gordon will make his maximum profit of $2.50 per share. On the other hand, if the stock stays below $65, the entire amount he spent on the trade will be lost.

"With this trade, we're trying to hit a single or a double," rather than trying to swing for the fences, Gordon said.

Microsoft is currently up almost 4 percent year to date.


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Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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