stocks
Playing a mean-reversion setup in beaten up Mag 7 stocks, especially Microsoft
Sustained market pressure has a silver lining: effectively resetting valuations for many high-flying stocks, bringing them back down to Earth.
TL;DR
- February markets experienced a selloff, intensified by escalating tensions with Iran.
- This pressure has reset valuations for many high-flying stocks, creating potential buying opportunities.
- Two key rules for navigating choppy markets: respect the VIX and extend trade timeframes (45-60 days).
- Microsoft is identified as a prime target for a mean-reversion setup due to its ~30% value drop since November 2025.
- Technical indicators for Microsoft: bullish MACD crossover on February 16 and 25, and a sharp recovery in RSI from oversold levels.
- Proposed trade: a Microsoft 390-395 bull call spread with April 10 expiry, costing $250 per spread, offering a 100% return if the stock is above $395 by expiration.