💐Happy Mother’s Day weekend to all the moms in the Edge Navigator community.
Welcome back to The Daily Splash — a quick look each day at what’s moving, what’s failing, and where capital is flowing across the market.
When markets push toward all-time highs, fear of missing out spreads fast. Traders start hunting for lagging stocks, assuming they’ll eventually join the rally.
But some stocks lag for a reason.
In some ways, this is the inverse of Warren Buffett’s classic line: ‘Only when the tide goes out do you discover who’s been swimming naked.’
So I dug through the Next Wave “In Cash” list and pulled out two bear flag patterns still struggling inside this broader rally.
ServiceNow (NOW)
ServiceNow has spent much of the past year under pressure despite strong reported growth. Investors have increasingly questioned whether enterprise software companies can maintain premium valuations as AI tools threaten traditional SaaS workflows and pricing power.
The chart continues to show a series of lower highs beneath a declining 200-day moving average — one of the classic characteristics of a long-term downtrend. The recent upward-sloping channel appears more corrective than impulsive so far, which is typical behavior inside a bear flag structure. In simple terms: general market strength has lifted the stock, but buyers have not yet proven they can reverse the larger trend.
Microsoft (MSFT)
Microsoft remains one of the dominant AI infrastructure companies on earth, but the stock itself has not participated nearly as aggressively as many traders expected during the latest AI-driven rally. Investors have increasingly focused on margin pressure, massive AI spending requirements, and slower relative cloud growth versus competitors.
From a technical perspective, Microsoft is attempting to stabilize after a sharp decline earlier this year. However, the stock remains below its 200-day moving average, and the recent advance has so far failed to produce a decisive breakout above prior resistance. The highlighted area near 405 represents an important support zone. A break below that level would suggest sellers are regaining control and could reopen the path toward another downside leg.
This one has a caveat.
While still technically weak, the April rally in MSFT did interrupt the prior downtrend. A break back below roughly 405 would confirm the bear structure again — the same zone where the last deep downside leg accelerated.
The trade
Shorting stock carries significant risk. Both symbols have highly liquid options chains which offers defined risk opportunities. I generally prefer put calendars and diagonals for bearish structures because they can be more forgiving during volatile trend transitions. Call credit spreads are simpler to execute and manage, but carry higher risk vs. reward.
Both companies have earnings reports expected around late July 2026, which would materially increase volatility risk for any open options position. Consider reducing or closing positions before earnings.
These symbols were identified by sorting through the “In Cash” section inside Next Wave Daily Signals — often where failed rallies and weak relative strength become easier to spot.
— Andrew Falde
Edge Navigator
For information and education only. Not advice. Options trading involves unique risks. Read important disclosures.