Microsoft Leads the Magnificent Seven into Earnings

With a $135B OpenAI bet and a bullish technical setup, all eyes are on post-market confirmation.

Trading Lessons
October 29, 2025

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When the world’s biggest software maker quietly adds a $135 billion asset to its portfolio days before earnings, ❗traders pay attention.

Microsoft just re-inked its partnership with OpenAI, turning a years-long alliance into an equity-level bet — and it’s happening right as the chart flashes a bullish formation known in technical analysis as the cup and handle.

The timing couldn’t be better. With earnings due today after the market close, both the numbers and the pattern are aligning for a move worth watching.

The Context

Earnings season has entered its most critical phase.
Through Friday, 145 S&P 500 companies (roughly 29% of the index) have reported results, showing earnings growth of 14.9% on 7.8% higher revenue, with nearly 87% beating EPS expectations.

Meanwhile, all three major indexes hit record highs last week after cooler inflation data and rate-cut optimism reignited risk appetite.

The Dow broke 47,000 for the first time, while the S&P 500 and Nasdaq joined in at fresh peaks.

Traders now see a 97% chance of a half-point rate cut by year-end, according to CME FedWatch — and a hint of U.S.–China trade progress only added to the bullish mood.

But the real spotlight this week belongs to two forces:
the Federal Reserve — expected to cut rates today — and Big Tech earnings, which together will likely set the tone for the final stretch of 2025.

The Catalyst

Microsoft’s new OpenAI deal reshapes the foundation of their partnership. The agreement gives Microsoft a 27% stake in the for-profit OpenAI Group PBC, while OpenAI commits to purchasing $250 billion worth of Azure cloud services.

The structure is simple but strategic:
→ Microsoft retains rights to use OpenAI’s models and IP (excluding consumer hardware) through 2032.
→ Both can independently pursue artificial general intelligence (AGI) — but within pre-set compute thresholds.
→ The revenue-sharing model ends once AGI is verified by a third-party panel or by 2030, whichever comes first.

It’s a deal that cements Microsoft’s role as both financier and infrastructure backbone of the AI era. Investors approved — the stock closed 1.98% higher at $542.07 on Tuesday.

The Setup

Since mid-summer, Microsoft’s chart has been quietly building tension.
The price has been consolidating within a rounded base, forming the cup, followed by a short pullback — the handle.

→ Resistance: $550
→ Support: $525
→ Breakout target: ~$610–$620, based on pattern depth

Volume’s been tapering off, volatility is compressed, and sentiment feels cautious — conditions often seen right before momentum re-emerges.

💬 What the Chart Says:

Microsoft’s chart now sits at the edge of resolution. Here’s how the structure unfolds:

Cup: The broad, rounded base formed between July and early October, marking a gradual shift from selling pressure to accumulation.
Handle: A controlled pullback in mid-October, reflecting light profit-taking near prior highs — a pause before conviction is tested.
Resistance Zone: Around $555–$560, where price has repeatedly stalled. A close above this range, backed by volume, confirms breakout momentum.
Support: The handle’s base near $520, a key level where buyers have consistently defended.
Target Range: Measuring the depth of the cup (~$40) projects a potential move toward $600–$610.
Volume Cue: Expanding volume on breakout would validate institutional participation — the tell that turns potential into confirmation.

A confirmed breakout could attract renewed institutional interest, particularly if earnings and AI-driven growth validate the move.

What’s Expected

→ Revenue: ≈ $74.96 billion (+14.3% y/y)
→ Earnings per share (EPS): $3.65 (+10.6% y/y)
→ Azure growth: +38% y/y › ~$23 billion
→ CapEx: $30 billion for Q1 (+50% y/y)
→ Commercial contracts: Multiple $100M+ renewals across Azure and Microsoft 365

Microsoft is expected to post another solid quarter — not record-breaking, but strong enough to confirm continued leadership in enterprise cloud and AI adoption. Analysts are watching whether elevated spending levels are a signal of accelerating demand or a test of near-term margins.

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Lesson of the Day: Understanding the Cup and Handle

First introduced by William O’Neil, the cup and handle is one of the most reliable bullish continuation patterns. It represents a pause within an uptrend before a potential breakout.

The cup and handle is a visual narrative of market psychology: recovery, hesitation, and conviction.

Cup: Accumulation and recovery — buyers gradually absorbing supply after a pause.
Handle: Controlled pullback as traders take profits and reset positions near resistance.

How to interpret it:

The cup should form gradually, with a “U”-shaped recovery.
The handle appears as a mild downward drift in the upper half of the structure.
Volume typically falls during the handle and expands at the breakout.

Trading approach:

Wait for a close above the handle’s resistance before entry.
Set a profit target equal to the depth of the cup added to the breakout level.
Manage risk with a stop below the handle’s low.

While simple in appearance, the pattern reflects deep market behavior — patience, accumulation, and conviction returning after a pause.

Takeaway :
Microsoft’s alignment of fundamentals and technicals offers a rare case study in timing.

A renewed OpenAI partnership, robust AI spending, and a clean continuation pattern together suggest that the next move could define how the market values the company’s next growth cycle.

If earnings confirm strength and guidance remains constructive, a breakout above $550 could mark not just a trade — but the start of the next leg in Microsoft’s long-term trend.

It’s a reminder that structure and story often meet in the same place — just before momentum begins.

Every trader loves a good breakout story. Share yours.

Share your story: Drop it in the comments here.

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