Morgan Stanley (NYSE: MS) traded in a consolidative manner after hitting a fresh all-time high at 77.16 last Tuesday. Overall though, the stock continues to trade above the upside support line drawn from the low of October 29th, as well as above all three of our moving averages on the 4-hour chart. Thus, with all those technical signs in mind, we would consider the near-term outlook of this stock to be positive.
Today, ahead of the US opening bell, the bank reports its quarterly earnings with expectations pointing to a USD 1.27 per share on sales of USD 11.54bn. Earnings in the same period a year ago were USD 1.2 on USD 10.86bn. A positive surprise may result in a positive gap in the share price and may lead to a break above the record of 77.16, something that may open the way towards the psychological round figure of 80.00. Now, in case the earnings surprise to the downside, we may see some further declines, but if the price stays above the aforementioned upside line, we would still see decent chances for a rebound.
Taking a look at our short-term oscillators, we see that the RSI lies above 50, but points down, while the MACD runs within its positive territory, but lies below its trigger line. Both indicators detect slowing upside speed, increasing the chances for a minor retreat before the next leg north.
Having said all that, in order to abandon the bullish case and start examining decent declines, we would like to see a strong break below the round figure of 70.00, which is also marked by the inside swing high of January 4th. The stock will already be below the aforementioned upside line and may initially target the inside swing high of December 9th, at 65.40. Another break, below 65.40, may extend the fall towards the 61.60 territory, marked by the low of November 30th.
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