Microsoft purchasing TikTok – short-term correction ahead?

<p>
<a href="https://admiralmarkets.com/analytics/traders-blog/microsoft-china-trump-tiktok"><img data-resize="auto" data-resize="auto" data-resize="auto" style="width:auto;" data-src="https://fxmedia.s3.amazonaws.com/articles/remote/0c41842b8eddebf1aeac8a9b6b3b61ba.jpeg" alt="Microsoft purchasing TikTok – short-term correction ahead?" rel=""></a>
</p><p>
Into the close of the past week of trading, tensions between the US and China have risen again with US president Trump banning U.S. transactions with the Chinese owners of the WeChat messaging app and TikTok video-sharing app.
</p><p>
The executive orders come into effect in 45 days, leaving thus a little more than one month to complete the purchase of TikTok's US operations through Microsoft – what implications could this have for the stock price of the US Tech giant?
</p><h2>Tensions between the US and China build, while Amazon CEO sells stocks – coincidence? </h2><p>
At first glance, it seems attractive for Microsoft to buy TikTok's US operations: in transferring TikTok's software code, which estimates show could be up to 15 million lines of artificial intelligence, the company's position in this sector could be cemented globally.
</p><p>
And while US president Trump said last week that the U.S. Treasury should get a cut of the acquisition, it is not very clear how that would work or if it's even legal, which means that Microsoft is about to close an attractive deal worth between 10 to 30 billion USD.
</p><p>
But what's certainly intimidating is that tensions between the US and China are again building, obviously amidst Trump's re-election campaign for the November elections, which could explain his aggressive stance and rhetoric towards China. In our opinion, it seems 100% certain that China will retaliate in one way or another.
</p><p>
However, there is a massive extended mode in the US tech sector, especially, with Apple, Amazon, and also Microsoft pushing to new All Time Highs despite the uncertain outlook in regards to the economic impact of the Coronavirus lockdown.
</p><p>
What's noteworthy in this context: Amazon's CEO, Jeff Bezos, has sold more than $3.1 billion worth of shares in his company, which were part of a prearranged 10b5-1 trading plan, according to filings.
</p><p>
While rule 10b5-1 allows company insiders like CEOs to set up a predetermined plan to sell company stocks in accordance with insider trading laws with price, amount, and sales dates being specified in advance, the last time Bezos sold more than $4.1 billion worth of shares in the company was in February, shortly before the massive crash due to the Corona lockdown.
</p><p>
While this may be a 'coincidence', rising tensions and Chinese retaliation in one way or another in the digital space could trigger a sharp corrective move many market participants seem to be waiting for, given the massive extension on the upside.
</p><h2>How to trade #MSFT in this environment?</h2><p>
While we are remaining clearly bullish on Microsoft stock, a short term-correction could certainly be expected and probably traded profitably in the short-term.
</p><p>
On the daily time-frame, we can spot a potential bearish divergence in the RSI(14), indicating diminishing bullish momentum with a break below 210.00, potentially resulting in an acceleration of bearish momentum.
</p><p>
Still, such a break should be traded cautiously and conservatively, since the sequence of rising highs and lows has remained intact as long as the stock has been trading above 200 USD.
</p><p>
A break below that level would interrupt the technical long-sequence, making a correction to as low as the 185 to 188 USD region an option.
</p><p>
Nevertheless, pushing to new All Time Highs and above 220 USD could negate this bearish thought, levelling the path for further gains in #MSFT:
</p><p>
<img data-resize="auto" src="https://fxmedia.s3.amazonaws.com/articles/remote/3419410f17c26caa9495c89f2013b0ce.png" alt="FB chart" rel="" />
</p><p>
<em></em><em>Source: Admiral Markets </em><a href="https://admiralmarkets.com/trading-platforms/metatrader-5"><em>MT5</em></a><em> with </em><a href="https://admiralmarkets.com/trading-platforms/metatrader-se"><em>MT5SE Add-on</em></a><em> #FB chart (between April 03, 2019 to August 13, 2020). Accessed: August 13, 2020 at 08:00 PM GMT -</em> <em>Please note: Past performance is not a reliable indicator of future results, or future performance.</em><em> </em>
</p><p>
In 2015, the value of #MSFT increased by 19.44%. In 2016, it rose 12.00%. In 2017, it increased by 37.66%. In 2018, it went up 18.74% and in 2019, it increased by 55.26%, meaning that after five years, it was up 238.3%.
</p><p>
<br>
</p><h2>Discover the world's #1 multi-asset platform</h2><p>
Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!</p><a href="https://admiralmarkets.com/trading-platforms/metatrader-5"><img data-resize="auto" src="https://fxmedia.s3.amazonaws.com/articles/MT5_CTA-15.png" alt="Trade With MetaTrader 5" rel="" /></a><p><em>Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:</em></p><ol><li>This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.</li><li>Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.</li><li>Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.</li><li>To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.</li><li>Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.</li><li>The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.</li><li>Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.</li><li>The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.</li></ol><p><a href="https://admiralmarkets.com/trading-platforms/metatrader-5"></a><em>Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the </em><a href="https://admiralmarkets.com/risk-disclosure"><em>risks</em></a>.<br></p>