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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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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